Financial Planning Topics for Retiring Californians (2025)

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Financial Planning Topics for Retiring Californians (2025)

Home » Blog » Financial Planning Topics for Retiring Californians (2025)

California, the “Golden State,” is among the best places in the world to live. For California’s economic, governmental, and public system to function, its citizens and businesses need financial support. Powered by state and local taxes and federal funding, local administrative bodies help everyday Californians and care for those most vulnerable within the community. Understanding the characteristics of the Golden State’s laws for retirees can empower them to make informed financial decisions that best suit their retirement needs.

Our list of planning topics California’s retirees need to be aware of include:

Prop 13

Do I need a lawyer? Yes

Proposition 13, a significant property tax legislation in California, was passed in 1978. It’s crucial for retiring Californians to understand this law as it directly affects their property taxes. What’s commonly called “Prop 13” is a collection of past and recent state legislation. These laws, enacted by Californians and codified into law, are sometimes known as “special rules” for California property owners.

The laws define and expand but also narrow the scope of what situations the special rules will apply and when Californians can and cannot avoid property tax reassessment upon transferring certain real estate property.

Limitations on property tax rates

Proposition 13 limits property taxes by capping the maximum tax rate at 1% of the property’s assessed value at purchase, plus any voter-approved local taxes and other assessments. A property’s assessed value can only increase by a maximum of 2% per year, regardless of real estate market fluctuations or rising property values. Generally, under Prop 13, properties risk reassessment or partial assessment when there is a transfer of ownership or along with new construction.

Naturally, avoiding or mitigating how much of the property is subject to a reassessment can save long-term property owners money. Homeowners who have held properties for many years may enjoy paying a lower property tax than newer buyers in a neighborhood.

Transferring a property’s “base value”

The State of California wants retiring residents to find their “forever home” and stay within the state. Prop 19 reinforces this by better incorporating Propositions 60 and 90 for those 55 years or older, those severely disabled, and now those affected by wildfires or other disasters.

For those meeting these specified eligibility requirements, homeowners may transfer an existing property’s “base value” or California’s property tax factor on the original property’s assessment value. This factor is transferred and, moving forward, associated with a new property located anywhere in California. The law permits residents to do this up to three times in their lifetime.

Planning “intergenerationally”

The primary intention of enacting the original Proposition 13 law was to provide property owners with the planning option to transfer a primary residence and its corresponding taxable base value to heirs when they die—the intention was to extend benefits to the next generation of Californians.

What’s the plan? Financial Planning and Prop 13

Prop 13 and its related propositions will inevitably influence retiring Californians’ decision-making regarding long-term residence and ownership. Since changes to a Prop 13 property or moving to a new location can significantly affect property valuations and for which to calculate property tax, the amount is identifiable as a variable cost, considered and factored in when making retirement plans.

Individuals should incorporate all known rules, strive for predictable asset transfer outcomes, incorporate personal qualitative preferences into primary residence planning, and understand any short-term or long-term tradeoffs.

Considerations with Prop 13:

Bequeathing property. Individuals may transfer residence property to children or orphaned grandchildren upon death and maintain the “base value” from which they will calculate future property tax. How might such a maneuver play into a property owner's financial plan and, eventually, a trust and estate plan?
Moving or selling property. Some individuals consider moving upon retirement. How might property taxes and other expenses change if the move involves selling and replacing the home with a new one?
Property improvements. When a Prop 13 property undergoes improvements, the amount of the update is considered a new construction assessment and is added to the property’s base year value. This new value is the primary variable the county will use when calculating property tax in subsequent years. It's important to note that significant improvements may reduce or eliminate any existing Prop 13 benefit.
Changes to law. Prop 13 also applies to commercial properties (and businesses). The law allows these property types similar limitations on property tax increases. However, recent proposals and passed legislation have narrowed the statute considerably. What are the potential changes that could affect personal planning?

How planning changed with Proposition 19

Prop 19, a significant change in retirement planning, has made it easier for retirees to transfer the base value of their primary residence properties to any property in the state. However, it’s important to note that the law also narrows the eligibility of the transfer base value to estate beneficiaries upon an owner’s death.

Considerations with Prop 19:

The Up-size. Eligible homeowners can use the special rules even when considering a move to a more expensive home. Eligible homeowners have no limit to the market value of a replacement property. However, the excess of the original property’s market value (above the selling property’s current market value) adds to the newly transferred value. The replacement’s market value can exceed the original’s market value up to one hundred and five percent (105%) if the replacement purchase occurs within the first year after the sale of the original, or one hundred and ten percent (110%) in the second year with no excess added to the transferred taxable value.
Relocating within California. Homeowners may be eligible to maintain their primary home’s property “base value” when moving to another primary residence located anywhere in California. The transferee must live in the home as their primary residence and, within one year of transfer, file for the Homeowners’ Exemption (BOE-266/ASSR-515 or Disabled Veterans’ Exemption (BOE-261/EXM-32) to qualify for the exclusion.

Primary residence requirement. A new limitation imposed by Prop 19 stipulates the reassessment of an inherited home unless the eligible beneficiary uses the property as their primary residence. If not, the property's assessed value will adjust to the fair market value in the year the transfer occurs, likely leading to higher property taxes for the beneficiary.
Transferring to children. There is now a limit to the value that can be excluded for a family home (or each legal parcel of a family farm). The value limit equals the property’s taxable value (or factored base year value) at the time of transfer plus one million dollars. The difference adds to the taxable value if the market value exceeds this limit. The one million allowance is adjusted every year on February 16th by the State Board of Equalization (BOE).

Common complications:

The unexpected. Changes to a person’s living situation, job status, or health can force the need to move or sell property. An unexpected event can result in giving up certain Prop 13/ 19 benefits or other beneficial planning tactics.
Beneficiary Infighting. Obtaining a Prop 13 property can create a non-spousal multiple-owner situation. Real estate is generally an illiquid asset. Some beneficiaries may prefer to maintain the asset (and benefits from Prop 13) when considering a sale. This, too frequently, can create friction among heirs.
Dissolution of a Partnership. Whether a divorce or another formal or informal arrangement, splitting assets and establishing new living situations often means developing two new, separate, fully self-functioning financial plans.
Probate. This is the sometimes arduous legal process through which a deceased person's assets are distributed and debts settled. Supervised by a California court, probate ensures the distribution of a deceased person's estate to beneficiaries.

Is my property eligible?

Any homeowner in California is “qualified” to benefit from Prop 13. However, to see a significant benefit, some time must likely have passed for the original owner. Estate planning techniques for maximizing benefits focus on setting up a long-term game plan for retirement home planning and ultimately coordinating an estate transfer upon the original owner’s death. The intention is to preserve the “base value” for the next generation and offer a viable solution for staying in California.

“Qualifying” with Prop 19 involves separate planning considerations from Prop 13. While Prop 19 does act to limit the effectiveness of Prop 13 with certain taxpayers, much of Prop 19’s language benefits homeowners 55+, people with disabilities, and those affected by wildfires and other disasters. Its planning effectiveness is intended for those who qualify and are considering where to “live out” retirement years.

The following must be true to “qualify” for the “base value” transfer to any place within the state under Prop 19.

Either the property owner or their spouse is age 55 years or older at the time the original primary residence is sold.
Replacement property is either purchased or new construction occurring within two years of the sale of the original property.
Both the original and replacement properties must be eligible for the homeowners’ or disabled veterans’ exemption.
The claimant must own and reside in the original property at the time of its sale or within two years of the purchase or new construction of the replacement.
Either one or both the sale of the original property or the purchase/completion of new construction of the replacement occur on or after April 1, 2021.

In-Home Care

Do I need a lawyer? No

Californians get to enjoy living longer and having a higher quality of life. Most retirement plans consider in-home or community-based care options to support ongoing health and wellness for later years. Many opt to live in their own homes and communities versus a facility. However, challenges to accessibility of services may make doing so unaffordable for some older middle-income adults. Many of whom are often primarily covered by Medicare.

Aging at home

The state is aware of the challenges retirees can face getting in-home care services and the sometimes limited choices among medical and non-medical services.

The state’s Master Plan for Aging is working hard to integrate services and make them more accessible to people at home and in the community. According to the plan, “coordinated care” between health plans and community organizations serving older adults and people with disabilities has improved lifelong health outcomes and overall satisfaction.

Do I need a lawyer? Yes

Medicare. Considered retirement health Insurance. Medicare and most health insurance plans don’t pay for long-term care. Individuals pay 100% for non-covered services, including most long-term care services. Learn more
MediCal. Otherwise known as California’s Medicaid program. Free or low-cost health coverage to eligible low-income individuals and families. MediCal may offer in-home care services for those qualifying for the In-Home Supportive Services (IHSS) Program.
Private insurance. Policy owners pay a premium for specified custodial care services. The policy must remain in force to be a viable strategy.
Out-of-pocket. The cost of care is paid or administered by the individual, family, or friends. Use the Cal Long Term Care Compare website to search licensed providers.
Community living. Buying into a community or organized living situation allows individuals to pool resources and may improve plan sustainability. Also, always consider a contingency plan.

Planning for Care

When planning for custodial care needs, consider what is sustainable – financially and personally. A contingency plan can often be highly complex, with quantitative and qualitative variables to consider. Work with a qualified advisor to confirm a long-term custodial care plan is viable and aligns with planning objectives.

Key variables to consider include:

Location. Individuals only sometimes have their first choice of where to receive care.
Cost of care. Regardless of whether the plan is insurance or to self-fund a long-term care plan, the cost of care continues to rise.
Asset spend down. It‘s not always practical for an individual (or a couple) to depend on spending down personal assets to the level required to qualify for government assistance programs.
Lifestyle. Reduced flexibility to physically spend time with loved ones, travel, and attend important events.
Caregiver stress. 91.4% of family and friend caregivers were unpaid. 58% experienced some form of financial stress due to caregiving. Source
Limited services. Specific locations may be more challenging to serve. Use Cal Long Term Care Compare to search for local services.

Strategies for paying for care

Everyone needs a plan for custodial care. That’s because the risk of needing custodial care has a high chance of occurrence. If insurance is unavailable, too costly, or not wanted, then there may be alternative solutions. Retirees should consider ALL viable options and what they will be content with. Proper planning requires an evaluation of financial solutions before the potential of the solutions becoming unavailable or too costly.

Still, even when insurance is unavailable or determined to be too expensive, a plan to pay for care is required. All retirees should consider and potentially incorporate alternative strategies and develop a cohesive game plan to pay for a potential care need.

Below are a few generalized solutions retirees use aside from insurance to fully fund, supplement, or reduce the cost of a potential long-term care need.

Spend cash reserves. Spending available cash is a straightforward solution. However, the lack of liquidity can quickly become problematic and overwhelming when the cost of care is ultimately realized or unexpected. In many situations, a secondary funding source is likely necessary and often requires a risk and reward evaluation.
Liquidate retirement accounts. Savings are set aside for when needed. The primary consideration is how accessible money is from retirement accounts, who else depends on the assets, the tax implications of a withdrawal, and the sustainability of the withdrawals.
Accelerated death benefit. Sometimes referred to as a Living Benefits Rider, it allows the policyholder to receive in advance the death benefit from a life insurance policy while still alive and if meeting certain qualifying conditions, such as being diagnosed by a doctor as having a terminal illness. Practically, the policy must remain in force until mortality. Generally, a policy with an ADB rider is most viable with a “permanent” life insurance policy and likely not a term policy expected to expire before mortality.
Sell property. Real estate can conceivably be sold to finance long-term care costs. However, this decision will likely affect cash flow, housing options, and personal preferences for the patient and any spouse, partner, or beneficiary. Property spent on care might include real estate, personal property, stocks, and bonds. Always consider the tax ramifications of any sale. Advanced planning is typically a good idea.
Get a reverse mortgage. A reverse mortgage can sometimes be a viable solution to staying in a home. But like any insurance contract, reverse mortgages are based on specified terms, estimated home values, and often current interest rates. Based on the terms of the contract, a reverse mortgage may or may not be a viable solution.
Relying on family and loved ones. If family or friends will provide care, they should be aware of and agree to any potential care duties. Family caring has an emotional cost on caregivers, sometimes exposing them to stress, depression, and lost opportunity.
Moving locations. Cutting the cost of care by moving to a cheaper location can be a viable solution. However, moving may require giving up specific preferences and may not be reversible. Furthermore, rural areas may not reliably offer certain medical or non-medical services.
Cutting expenses. Lowering expenses can help save money in the long term, but generally, when care costs occur, they come suddenly and can be persistent.

California Partnership Long-Term Care Policies

The State of California, in coordination with select insurance companies, offers California residents a “partnership policy.” According to the program’s language, “these companies agree to offer high-quality policies that must meet stringent requirements set by the Partnership and the State of California.”

Partnership policies work slightly differently than traditional stand-alone long-term care policies and may only be appropriate for some. We advise strategic planning and, as always, read the policy. The program is well known for offering special consumer protections, such as Medi-Cal Asset Protection.

Increasing Costs for Care

Many long-term policies, mainly stand-alone policies, cannot commit to not ever needing to raise future premium rates. This occurs when variables such as the cost of care increase beyond anticipated expenses.

It is vital for Californians, when researching long-term care insurance carriers, to consider the strength and likelihood of future rate increases. Visit the California Department of Insurance’s website, California Long-Term Care Rate & History Guide, to learn more.

The Long-Term Care Insurance Task Force

The passage of AB 567 (Calderon, Chapter 746, Statutes of 2019) established the long-term Care Insurance Task Force (Task Force). The California Department of Insurance intends to explore the feasibility of developing and implementing a culturally competent statewide insurance program for long-term care services and support. Learn more

Disaster Insurance in California

Do I need a lawyer? No

Part of prudent planning is preparing financially for an earthquake, fire, flood, or other unforeseen disaster. Because California is prone to earthquakes and other natural disasters, adequate insurance coverage and emergency preparedness plans are a part of a homeowner’s financial due diligence.

How can I protect myself?

Get organized. Be sure not to let the policy lapse. Also, read your contract and make sure the insurance company follows all stated policies and procedures. Keep FULL policy documents archived and available. Don’t rely on obtaining documentation after a potential claim occurs. If something happens, policy owners will want records readily available. Try to pay annually to save on premiums, and make a video recording of personal items. Finally, confirm that deductibles, coverage, and replacement costs all match the insurance needs.
Claim wisely. While an insurance company cannot drop you simply for making a claim, in general, it's a best practice to consider insurance a replacement for things you cannot afford to replace yourself. These are significant, large ticket items, not minor or more financially manageable claims. If it is generally your philosophy to claim more significant losses, consider having a higher deductible to save on premiums over time.

Buy insurance on items that are irreplaceable financially.

What if I get dropped?

In California, insurance carriers have become increasingly unwilling to renew or place new businesses with “high-risk” properties. If no carriers will consider, applying for coverage through the California FAIR program is probably the last best option.

We can all agree that the goal is to improve insurance for all Californians. Your experiences matter. Contact the California Department of Insurance with an experience we can all benefit from knowing about. To find a state insurance department outside of California, search NAIC.org.

Read the policy

Specific policies, such as homeowners’ and umbrella policies, require at least one read-through of policy documentation. Understanding what a policy covers and its limitations and exclusions is critical information in a crisis. Take action before a potential claim arises.

What’s ON a declaration page?

The declaration page aims to communicate an individual’s coverage concisely, but it may not contain all the details needed in the event of a claim.

Items typically ON a declaration page:

Items typically NOT ON a declaration page:

In most cases, individuals may have access to digital and physical methods. We also recommend selecting a cloud drive provider and storing these essential documents so they are readily accessible to oneself and family in an emergency.

Other policy types

Supplemental insurance policies, such as flood and earthquake insurance, will have individual policy coverage amounts and provisions. These documents are often the most important to maintain. They contain vital information needed during a potential disaster and are not typically made entirely accessible online from all insurance companies.

Upon approval for coverage, the insurance company will mail policyholders documents or make digital copies available for download. Like with other insurance documents, policy owners should archive these documents, such as on a personal cloud drive, making the records readily accessible should a claim arise.

Home Ownership in California

Do I need a lawyer? Yes, if substantial.

For some forms of property, such as a post-tax investment account, titling is established when an account is opened. Changes to titling are infrequent. Sometimes, an account designation must change for legal or strategic planning purposes. In that case, the standard procedure is to be mindful of unnecessary tax complexities and, if appropriate, transfer assets from an individual or joint account to a brand new account held by a Trust. To avoid a taxable gain, transfer assets like stocks, bonds, and mutual funds via an “in-kind transfer,” which avoids effecting a sale (and triggering a capital gain).

However, successful titling is accomplished for real estate by formally recording the deed of property at the county recorder’s office. A title change may need to occur for reasons other than death and inheritance. A typical example is when property is temporarily “taken out” and then “put back” into certain ownership situations, such as a Trust. A change might occur to satisfy a loan or to facilitate specific financing conditions.

Types of Ownership in California

Understanding the different types of property ownership in California is crucial. It can be a sole individual, multiple individuals, or partnerships. This knowledge will help make informed property decisions.

Ownership types applicable to Californians include:

Fee simple, Sole owner. The most basic form of ownership and property transfer. Signed instructions or a Transfer on Death (TOD) form will transfer ownership upon the owner's death of certain property to other individual(s). Probate could be required if the property is sizable and there is no Will or Trust.
Joint tenants with right of survivorship (JTWROS). A common property arrangement where the survivor is in joint ownership with another (such as a marriage). At death, the surviving party automatically has full ownership rights over the decedent's share.
Tenants in common (TOC). In this type of property arrangement, the descendants' portion of the property is settled separately by the estate (a Trust) and not automatically transferred to the surviving part(ies).

Community property

California was admitted to the Union on September 9, 1850, and is one of the original community property states. California’s community property law was a carryover from previous Mexican rule. In 1848, the Treaty of Guadalupe Hidalgo ended the Mexican-American war and ceded California territory to the United States. The treaty preserved the existing community property rights of Mexican citizens living in Californian territory. Since then, the state has improved the law but maintains the law’s original concept.

Map of the United States and Mexico used in post-war negotiations. Wikipedia

Under current law, property acquired by either spouse during the marriage is considered jointly owned by both spouses in the event of a divorce or death of one spouse. If a California court rules to split the assets, “[the court] divides the community estate of the parties equally.” As in 50/50. California Code 2550.

Community property rules are regardless of which spouse earned or generally acquired the property. The noteworthy exception is when the property is acquired, maintained, not commingled, and held as “separate property.”

Common exceptions include:

Types of deeds in California

Deeds are legal documents that serve as evidence of ownership transfer or prove interest in real property, such as land and buildings. They are used for real estate transactions and formalize ownership through the local recorder’s office.

View more examples of California deeds by visiting saclaw.org

Common deeds relevant to Californians:

Grant deed. Used when a person on a current deed transfers ownership or adds someone to the deed.
Quitclaim deed. Often mispronounced as “quick claim.” A quitclaim is useful when an individual gives up property ownership rights to another—frequently used in divorce proceedings or inheritance situations.
Interspousal deed. A dedicated form is used between spouses or registered domestic partners to exchange real estate to or from community property.
Warranty deed. Used when transferring real estate property ownership from a seller to a buyer. A warranty deed provides specific assurances and guarantees.

To learn more, visit Top Non-Traditional Financial Planning Considerations.

Revocable Transfer on Death (RTOD)

Sometimes referred to as “The Poor Man’s Trust,” California is one of a few states that allows for a Revocable Transfer on Death (RTOD) to transfer real estate. Its purpose is to inexpensively avoid probate on property. However, even with small estates, not all situations are straightforward, and the appropriateness of relying upon a Revocable Transfer on Death (RTOD) can be highly subjective.

Forming a trust with a qualified attorney is considered much more reliable when attempting to avoid potential probate pitfalls, delays, and costs. Since the goal is to make sorting affairs easier for loved ones and trusted professionals, generally, the safe bet is to use a (typically revocable) living trust.

In what instances might a Revocable Transfer on Death (RTOD) be appropriate?

When might a Revocable Transfer on Death (RTOD) be problematic?

A beneficiary dies. There is likely no contingency plan for when a beneficiary predeceases the deceased.
Multiple beneficiaries. In some cases, disagreements can arise from how to manage or maintain the property.
Failing to document. Errors and omissions and failing to fulfill the notary and witness requirements.

Learn more about a Revocable Transfer on Death (RTOD) by visiting saclaw.org

Avoiding complications

Regarding property transactions, it’s essential to rely on experienced professionals. Real estate agents, attorneys, and title companies are there to help you navigate the process. Their expertise is especially valuable in complex situations, ensuring a transaction goes precisely as intended.

Common missteps include:

Errors and omissions. Incomplete, missing, or inconsistent tiling of ownership.
Forgot to record. The deed must be formally recorded at the county recorder’s office to be considered complete.
Unresolved debts. Property liens or unpaid property tax will hold up a transaction. Visit the recorder’s office to check a property’s information.
Not getting help. Don’t be overconfident. Complex and highly consequential property changes may require the assistance of experienced professional(s).

Property ownership in other states

Unlike community property states, property in common law states is not automatically assumed to be joint property solely because someone is married and the assets were acquired after the marriage. For this reason, the primary distinction and overall purpose of Tenancy by the Entirety (TE) in common law states is the ability for property owners to specify how exactly assets should be divided in the event of a divorce or death. For example, assets may be titled so that neither spouse is permitted to sever the survivorship rights of the other spouse without mutual consent.

For Californians, since we follow the community property system, Tenancy by the Entirety (TE) is not applicable for property located in the state.

Getting ducks in a row

Whenever a change in property title occurs, homeowners should follow precise procedures and confirm that all due diligence tasks are complete before effecting a transaction. When appropriate, they should rely on financial professionals, accountants, and attorneys to avoid costly mistakes.

The “Step-Up”

Do I need a lawyer? Yes. Certainly over specified thresholds.

The “step-up” in basis to the fair market value at death is probably the most universal tax planning benefit available to the everyday American. Federal code 26 CFR § 1.1014-2 states that on a person’s day of death, an adjustment occurs to the property’s cost basis or a “step-up” to the Fair Market Value. The adjustment can result in potentially sizable tax savings for the inheriting beneficiar(ies) because any capital gains built up before death are effectively wiped away. The “step-up” reduces capital gains tax when the asset is sold. If the property further increases by the time of sale, additional gains are potentially taxable from whatever the fair market value was on the day of death.

The step-up applies to many types of property other than real estate.

The primary reasons to avoid probate include:

The step-up in basis is by no means a California-specific consideration. Any individual in any state can benefit from this provision. What is relevant to Californians is the potential tax savings.

There are tax advantages to property being a long-term endeavor.

Any legal and ethical strategy used to reduce large sums of tax is often worth incorporating into planning. Californians who own property as their primary residence should probably consider their long-term game plan when purchasing their “forever home.” It’s important to understand that maximizing the step-up in basis (and Prop 13) is to own the property until death. Hopefully, that’s a long way off!

Avoiding Probate in California

Probate is the legal process to follow at death when no estate plan, Will, or other valid beneficiary instructions are in place. In this case, assets are often subject to a lengthy probate process as a probate judge distributes them in accordance with state law.

Examples include:

Expenses. The cost to settle estate assets through probate can be between 3% and 8% of the estate's value.
Lack of privacy. Information with details about assets may become publicly available.
Delays. Assets subject to probate are often unavailable to beneficiaries during the probate period (usually six months or sometimes much longer).

Small Estate Affidavit

Through 2024, and per California state law, the estate may not be subject to the formal probate process if gross estate assets are more than $184,500 (including any California real estate). Estates smaller than $184,500 in total gross assets and with real property at most $61,500 and located in California may qualify for the more expedited probate process.

In these cases, a Small Estate Affidavit may be used in California to distribute assets and change title.

Transfers via a trust

One goal of the financial planning process is to develop a strategy and preemptively maneuver assets to avoid the probate process altogether, usually by using a revocable trust.

Still, more complicated estates may require specialized trusts to reduce estate tax, be tax efficient, maintain desired outcomes, or avoid beneficiaries from disqualification from government assistance programs. Estate planning techniques will use a trust drafted by a licensed attorney and supersede the need to go through the probate process. A trust and detailed estate plan can streamline distributions for beneficiaries, reduce tax, eliminate court fees, reduce other complications, and avoid unnecessary frustration.