California’s Proposition 19 changed how property taxes work when parents pass a home to their children. Since February 16, 2021, a child who inherits a parent’s home can generally keep the parent’s lower property tax base only if the child moves in and makes the home their own principal residence. That rule works for many families, but it created a hard question for families who hold a home in a special needs trust for a child with a disability. On September 27, 2026, Governor Newsom signed Senate Bill 974 (Seyarto) to address part of that problem. Here is what the new law does, and what it may mean for California families.
Key takeaways
- SB 974 amends Revenue and Taxation Code section 63.2, the statute that implements Proposition 19’s parent-child and grandparent-grandchild exclusions.
- The bill states that a special needs trust established under Probate Code section 3604 is an eligible “medium of transfer” for Prop 19 purposes.
- The other Prop 19 conditions still apply: the home must become the transferee’s principal residence, and the homeowners’ or disabled veterans’ exemption must be claimed within one year.
- The bill has no urgency clause, so it is expected to take effect January 1, 2027, under the usual rule for new statutes.
- Families who use, or plan to use, a special needs trust should review how the family home is titled and how the trust is drafted.
Background: How Prop 19 treats parent-child home transfers
Before Prop 19, Propositions 58 and 193 allowed parents (and in some cases grandparents) to pass a home and other real property to children without a property tax reassessment. Prop 19 narrowed those exclusions. According to the State Board of Equalization’s Prop 19 fact sheet, the family home exclusion now generally requires that:
- the home was the parent’s principal residence;
- the child (or an eligible grandchild) makes it their own principal residence within one year of the transfer;
- the child files for the homeowners’ or disabled veterans’ exemption within one year of the transfer; and
- a claim form (BOE-19-P for parent-child transfers, BOE-19-G for grandparent-grandchild transfers) is filed with the county assessor.
The exclusion is also capped. The home keeps its existing taxable value plus an allowance that started at $1 million and is adjusted for inflation every two years. For transfers from February 16, 2025 through February 15, 2027, the BOE set that allowance at $1,044,586. Value above the cap is added to the taxable value. For a broader overview of planning around these rules, see our page on avoiding probate in California.
The problem SB 974 addresses
Existing law already says that a “transfer” for Prop 19 purposes includes a transfer of present beneficial ownership through an inter vivos (living) trust or a testamentary trust. But the statute did not specifically mention special needs trusts.
A special needs trust is often used so that a person with a disability can benefit from property without losing eligibility for needs-based public benefits. In that setup, the beneficiary may live in the home, but the trust, not the beneficiary, holds title. According to the author’s office, families worried that a home held this way could be reassessed because the beneficiary could not take ownership directly without undermining the trust’s purpose.
What SB 974 changes
SB 974 revises the definition of “transfer” in Revenue and Taxation Code section 63.2, subdivision (e)(9). Under the enrolled bill, a special needs trust established under Probate Code section 3604 is to be considered an eligible medium of transfer. The Governor’s September 27, 2026 legislative update lists SB 974 among the bills signed that day.
A few points are worth noting:
- It is framed as a clarification. Legislative analyses describe the bill as clarifying existing law, and the BOE expected no property tax revenue loss.
- It refers to section 3604 trusts. Section 3604 covers special needs trusts that a court approves when money belonging to a minor or a person with a disability is ordered paid into a trust, with continuing court supervision. Whether a particular trust fits this language is a question to review with counsel.
- The rest of Prop 19 still applies. The bill does not remove the principal residence requirement, the one-year exemption filing window, the value cap, or the claim filing deadlines.
When does it take effect?
SB 974 does not contain an urgency clause. Under the general rule for California statutes enacted in the 2026 regular session, it is expected to take effect on January 1, 2027. If you have a pending reassessment question involving a special needs trust, ask whether the timing of the transfer matters in your situation.
What this means for California families
If you have a child or grandchild with a disability, SB 974 is a reminder that property tax planning and benefits planning need to be coordinated. Some practical steps:
- Review your trust documents. Your living trust may already include special needs trust provisions. Confirm what kind of trust it creates for the beneficiary and how the home would be held after your death.
- Check how the home is titled. A home that is not properly funded into a trust may have to go through probate before any trust provisions apply.
- Plan for the residence and exemption requirements. The beneficiary will generally need to live in the home and the homeowners’ exemption must be claimed within one year of the transfer.
- Calendar the claim deadlines. The BOE fact sheet explains that the BOE-19-P or BOE-19-G claim is generally due within three years of the transfer and before the property passes to a third party, with some alternative timing rules.
- Coordinate with benefits rules. Court-approved section 3604 trusts include required protections for certain public agency liens. Property tax savings should be weighed together with these rules.
Frequently asked questions
Does SB 974 apply to every special needs trust?
The enrolled bill refers specifically to special needs trusts established under Probate Code section 3604. Existing law already treats transfers through living and testamentary trusts as transfers for Prop 19 purposes. How a particular trust is treated depends on its terms and the facts, so it is worth having the documents reviewed.
Does the beneficiary still have to live in the home?
Yes. SB 974 does not change Prop 19’s requirement that the home become the transferee’s principal residence, or the requirement to claim the homeowners’ or disabled veterans’ exemption within one year of the transfer.
Is the $1 million cap affected?
No. The value limit still applies. For transfers from February 16, 2025 through February 15, 2027, the BOE set the allowance at $1,044,586 above the home’s existing taxable value.
When does SB 974 take effect?
The bill has no urgency clause, so it is expected to take effect on January 1, 2027.
Talk with an attorney about your plan
If you are planning for a family member with a disability, or you want to understand how Prop 19 could affect your home, schedule a free 15-minute call or call 1 (800) 285-1140. Consultations are available in English, Romanian (Romanian-speaking lawyer) and Russian (Russian-speaking lawyer).
Author: Andrei Jingan
This article is general information, not legal advice. Reading it does not create an attorney-client relationship. Attorney advertising.