Monthly Archives: April 2020

Part Two: Your Source for Timely, Accurate News and Info on Trusts & Estates, for California Proposition 13 & Proposition 58

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Proposition 58 Property Tax Transfer

Proposition 58 Property Tax Transfer

Let’s take a quick look at the actual state tax data in the great state of California…  Overall revenue going to local government entities from property taxes throughout California was nearly $5.0 billion in 1978 to 1979… and by 2010 to 2011 real estate tax revenue was at $49 billion per year! An increase that is two and a half times the rate of inflation over the same period, furnishing California local government entities with a very robust stream of real property tax revenue.

On the human side, away from the economics of the issue, folks in California, prior to Proposition 13, before 1978, were seeing elderly neighbors, friends and senior relatives, inheriting property taxes in CA… being forced from their homes as egregious real property tax increases spiraled out of control — and in some areas literally doubled from one year to the next — as older friends and beloved elderly relatives living right next door on fixed incomes, could not meet these unfair tax increases and were cruelly pushed out of homes they had been living in, and raised families in, for over 40 years. neighbors were being forced from their homes.

After Proposition 13 was voted into law, Californians saw right away the benefits of a tax system that would limit annual tax increases to 1% to 2% max, and began to provided a stable system for everyone in California – from government agencies that depend on property taxes, to people like seniors and other various middle class home owners… turning what had become a dreaded system of out of control real property taxes – into a fair, predictable tax system year to year – no longer a financial nightmare for those who happened not to be wealthy, living on modest or fixed incomes.

And of course in 1986 Proposition 58 was passed in California, making Proposition 13 all the more critical and invaluable…  smoothing out property transfer from parent to child into a formal transaction; middle class people  inheriting property taxes in CA now had the ability to avoid property tax reassessment at present-day rates, with the right to keep parents property taxes intact. Naturally, this was a major advancement for Californians, in terms of tax relief.  Not only for residential and commercial property owners – but for renters all across the state as well, since rents remained reasonable as long as landlords were not besieged by increased property taxes.

Nonetheless, those opposing this most popular tax solution called Prop 13 by Californians, still continue dragging the same old tired arguments through the gutters and broken down political avenues used by real estate executives, politicians and newspaper editors to put forth their old, discredited arguments in Op-Eds and widely debunked opinions in Editorials, in the few newspapers that will allow them the space to air out their opinions — despite the fact that everyone knows most Californians favor Proposition 13 & 58.  The critics are tone deaf.

We present these issues objectively in this go-to free resource blog for people interested in Proposition 13 and Proposition 58 property transfers…. For those keenly interested in learning more about how to avoid property tax reassessment, and how to keep parents’ 1% to 2% property tax limits safely in place in California, out of the reach of irrational opponents…

For those of us who want to know more about parent to child transfer and parent to child exclusion; about trust distribution loans, avoiding property tax reassessment, proposition 13 transfer, how to keep parents property taxes… and how to effectively transfer parents property taxes. And for property owners who wish to educate themselves further on the subject of inheriting property taxes, property tax transfer, real property tax transfer or real estate tax transfer.

If these interests, and additionally related topics, describe you – then you’re in the right place. We welcome your opinions and comments, and we’ll add your text comments or audio/video commentary, if you have something new, valuable, or unique to add to the discourse here.

PART TWO: California Proposition 58 and Loans to Trusts ~ Featuring Noted Trust Loan Expert Tanis Alonso from Commercial Loan Corp.

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Loans to Irrevocable Trusts for Proposition 58

California Loans to Irrevocable Trusts for Proposition 58 Property Tax Transfers

Our Interview with noted Commercial Loan Corp. Trust Loan and Proposition 58 specialist Tanis Alonso continues…

Property Tax Transfer:  Tanis, let me ask you…  Beneficiaries that call your company, desperate to keep parents property taxes;  for any solution to their property transfer / Proposition 58 issue – is it a safe bet to assume that 99% of the time there are elements that come up again and again?

Tanis Alonso (Commercial Loan Corporation): Well, that’s true, to a point. With beneficiaries that call us, with a trust or estate situation, there is always real property being inherited, going to one or several beneficiaries… and little, if any, cash – and each family always has different dynamics. There are always differences, as regards the people and details involved. But, the one constant you can be sure of is that there is always someone who wants to sell… and always someone who wants to keep the property they are inheriting… dead set against selling.

Property Tax Transfer: And at the end of the tunnel, is it safe to assume that with your company it’s generally a win-win equation, for everyone involved. Everyone involved, more or less, get what they want, right?

Tanis Alonso (Commercial Loan Corporation): That’s right.  99% of the time. The beneficiary, or beneficiaries, that want cash from the sale of the property that they’re inheriting, get the cash they were looking for, from the trust loan…

Property Tax Transfer: And the beneficiary or beneficiaries that want to keep the house, get to keep that house, and keep parents property taxes…

Tanis Alonso (Commercial Loan Corporation): Yes! And let me say that, typically, this is a really, really big win for them – as the siblings that wanted to sell are usually very vocal, and very aggressive about their desire to do so! That beneficiary that wants to keep that property, that is also able to get the other siblings a large amount of cash for their shares in the inherited real estate – while still being able to keep the home they’re so attached to, and keep parents property taxes; keeping parents property tax rate.  This would be practically impossible, were it not for our trust loan. And there’s your win-win equation!

Property Tax Transfer: And what about the cost factor? Costs involved in the equation… How does everyone benefit on that level, getting cash to the beneficiaries that wanted cash from a house sale? Versus coming up with property buyout cash themselves…
       
Tanis Alonso (Commercial Loan Corporation): OK, so cost involved, selling versus keeping inherited property. I’ll try to keep the equation simple. Costs associated with this property funding process through a trust loan, paying for everything, including beneficiary property shares buyout, taxes, etc. is, on average, 3.5% – So by someone keeping the family property everyone will receive more money than if they were to sell the property at approximately 6.5% in costs. The average trust receives $45,716 more to distribute than if they were to sell the property to some random buyer.  Each beneficiary on average is receiving $16,652 more by someone keeping the property, instead of selling it. And our average annual tax savings is $6,043. We have already saved a combined amount just shy of 1 million dollars for our clients on property taxes. That is a significant benefit for all beneficiaries when someone keeps the property instead of selling it! 

PropertyTax Transfer: So you’re saying those savings would have been completely lost, per beneficiary, if they had sold out to a regular buyer…

Tanis Alonso (Commercial Loan Corporation): That’s right. For example, say it’s you and your sister.  A major conflict. You want to keep the house you’re all inheriting from your parents, plus keep parents property taxes. Why should I let my sister sell? The solution there is because you are going to get more cash in your hands than if you were to sell the property! That’s the bottom line. A trust loan transaction takes 7-10 business days whereas selling will take a few months. Everyone receives more money, more rapidly, then if they were to sell the property on the open market. Everyone benefits from this… it’s win-win all the way around.

PropertyTaxTransfer: So you let your sister sell, so everyone wins – is what you’re saying.

Tanis Alonso: Of course! Let her sell, let her get her way – and you end up getting your way… you get what you wanted, to keep your house with everyone paid off and happy. No more conflict. On a $500,000 property – do you want to spend 6.5% to sell that property, with a realtor, or 3.5% through our trust loan, in keeping with the Proposition 58 tax system? Which number would you want to give away, 6.5% or 3.5%? 

Property Tax Transfer: Naturally. So the long range picture looks like increases in taxes as well, so that’s not as affordable either.

Tanis Alonso (Commercial Loan Corporation): Absolutely right. In certain cases a property tax reassessment can add an extra $700 to $1000 per month to your property taxes. That’s an extra $1,000 per month – not per year! Month after month. That is affordability vs not affordability to many. 

Property Tax Transfer: Going through the Proposition 58 tax system, with the trust loan paying everyone off…  What would property taxes look like going down that road?

Tanis Alonso (Commercial Loan Corporation): OK so the question is, “why do I need a trust loan to buy out beneficiaries who want to sell our inherited house?”  The answer is you can still keep the house you’re inheriting, and not spend any of your own money in the process.  The importance of the trust loan is that you can buy out your siblings and still keep parents property taxes. You keep 100% of the low Proposition 13 property tax base that was originally paid by your parents.  If you were to use your own money to buy out your siblings, the State Board of Equalization would see that as a sibling buying out a sibling – and that would definitely trigger a property tax reassessment. Naturally, the result of that would be higher taxes.  So you need the trust loan to buy out your siblings in order to take advantage of Proposition 58, and keep the low property tax base. 

Property Tax Transfer: Most people don’t have that kind of cash on hand nor do they want to use all of their cash for this just to buy out beneficiaries in an estate setting. Especially if the numbers go higher…

Tanis Alonso (Commercial Loan Corporation):  Beneficiaries who want to keep their inherited property still put a lot more money in their pocket, still save a lot more,  by not using their own funds…  by buying out beneficiaries that want to sell by going the trust loan route.  Staying within the discounted Proposition 13 tax base, being able to keep parents property taxes … taking advantage of the  Proposition 58 property tax system, or tax shelter.  Using this tax shelter  that we looked at before, if you recall – would be around $1,200 per year on a million dollar property.  Saving thousands of dollars annually on property taxes by taking advantage of Proposition 58; keeping their parents low property tax base. 

Property Tax Transfer: Yes, the difference in the numbers are stunning.

Tanis Alonso (Commercial Loan Corporation):  Yes it is.  So if you use your own money to buy out your siblings you will trigger a reassessment… if that was reassessed normally, without doing the property transfer and beneficiary payoff with our trust loan – you’d be looking at an $11,000 tax hit per year on the same million dollar property!  If reassessed at the current, present day, base rate – that tax hit goes up 10 times. A significant difference in cash back in your pocket after it’s all done and said. Trust loans are a huge benefit for all of these families and that’s how we’re able to really help people in a significant way.  

Property Tax Transfer: The amount of money saved really is remarkable.  And I can see that you genuinely enjoy helping your clients save a great deal of money with these trust loans. Making great use of the low Proposition 13 base rate, and the Proposition 58 property transfer tax shelter… The formula works!

Tanis Alonso: Absolutely. And helping people in this way is what it’s all about! That entire viewpoint is the basis for this whole company, from the top down – starting with the CEO, who is a truly terrific guy, who genuinely loves helping people, with money, memories, and time. And you can’t replace memories and time!

Property Tax Transfer:  You can’t replace memories and time… Very well put!  That is a concept to remember.

Tanis Alonso: It is so important to remember, when you truly care about what happens to the people you’re helping.

Property Tax Transfer: Very true.  Your clients are lucky to have you folks working for them.  Thanks so much for speaking with us today.

Tanis Alonso: Thank you.  It was a great pleasure chatting with you.

PART ONE: California Proposition 58 and Loans to Trusts – Featuring Noted Trust Loan Expert Tanis Alonso from Commercial Loan Corp.

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Loans to Trusts for Proposition 58

Loans to Trusts for Proposition 58

We sat in with noted Proposition 58, trust loan expert – Tanis Alonso, at Commercial Loan Corporation in Southern California.  Tanis has a uniquely profound, global understanding of the entire trust loan process; and applies a very human, not simply financial, viewpoint to the process ~ as does the entire team at the cloanc.com organization; with a strong, genuine focus on “helping people” not simply implementing financial transactions…

Property Tax Transfer: Thank you so much for agreeing to chat with us about Proposition 58 and trust loans today…

Tanis Alonso: Of course. It’s my pleasure.

Property Tax Transfer: Great. Tanis, can we take a close look at how the basic trust loan process works in California, from your perspective, as a lender – and from the point of view of your average everyday beneficiary, many who need to keep parents property taxes…  Some who want to sell a property they are inheriting from their parents – and of course the other beneficiaries to a trust or estate that are determined to keep that home, and fight that sale. But first, who is your typical caller? Who in the estate or trust scenario tends to reach out to you first?

Tanis Alonso: Basically, whomever is trying to not sell the inherited property – is generally the initial caller to my office. It might be the trustee, frequently at odds with certain beneficiaries… Or very often it’s a family member, one of the beneficiary’s to the trust that doesn’t want to sell that home.

Property Tax Transfer: Got it. So, what does an average Proposition 58 property transfer and trust loan scenario in California look like, contributing to peace of mind for property owners? There must be similar scenarios, that reflect average  trust or estate outcomes all across the state.

Tanis Alonso: Absolutely. One of the most common scenarios we see, here at Commercial Loan Corp., are elderly parents, for example… who, sadly, pass away, leaving loved ones behind. So, let’s say there is an estate, or perhaps a trust, and there are three beneficiaries involved… And property is the only asset… Let’s say there are no cash accounts. And this is not uncommon these days.

Property Tax Transfer: Yes, we hear that it’s quite common to see a trust inheritance, or probate estate, where there is very little cash left at the end of the road…

Tanis Alonso: Exactly. Parents who pass away in their nineties let’s say, who basically have spent most of their cash assets that were in savings, or in stocks and bonds, and by the time they get into their mid or late nineties, those assets are mostly gone, cashed out or spent –

Property Tax Transfer: You mean, simply spent on living… no frills, no traveling around the world, staying in fancy hotels, eating out in 5-star restaurants…

Tanis Alonso: Oh no, nothing fancy… just simple day to day living. Food, rent, medical expenses – normal expenses that eat up plenty of cash.

Property Tax Transfer: Certainly. Medical expenses can eat up an entire estate… and leave a house, and that’s all that is left in so many trusts, in so many estates, left by decedents. At least it’s usually paid for.

Tanis Alonso: Yes, many older homes being inherited by beneficiaries in these scenarios are not carrying any debt. Which is fortunate. So let’s say in many of these middle class or even upper middle class families there is a house, maybe some land, and possibly a few valuables…

Property Tax Transfer: OK. So there isn’t much money left in many inheritances… So what do beneficiaries do? When do these conflicts we hear so much about begin, when a house is being inherited by several beneficiaries… some who wish to sell, and some who prefer to keep the property, and to keep parents property taxes?

Tanis Alonso: Well, here is a typical middle class inherited real estate scenario – let’s say, for example, there are three beneficiaries and no other assets being inherited except an older home. One beneficiary wants to keep the house, to keep parents property taxes; while the other two siblings prefer to get cash from an immediate house sale, probably through a nearby realtor. But – instead of selling to a buyer, here is where Proposition 58 and a trust loan comes into play, providing liquidity and compliance with the Proposition 58 tax system – furnishing the two siblings who prefer to sell, with enough cash liquidity as if they had sold their shares in the inherited property to a buyer…

Property Tax Transfer: So why not sell? Why the trust loan?

Tanis Alonso: Because with a loan to a trust there is the upside of less expense. Frequently, we’re talking about ten times less of an expense than would normally be involved in a house sale. Again, a process compensating beneficiaries through a trust loan, instead of a house sale or coming up with the cash yourself… versus a formal house sale through a realtor that would cost approximately ten times the amount to process the entire scenario, a house sale, with realtor commission and fees, taxes, ancillary costs, etc…

Property Tax Transfer: Paying off the beneficiaries who wanted the cash from a house sale in the first place, right?

Tanis Alonso: Exactly. And so the rest of the trust loan goes to pay for 100% of parents Proposition 13 tax base – and the Proposition 58 tax system makes it possible to transfer the property to the beneficiary or beneficiaries that did not want to sell – to keep parents property taxes at the low Proposition 13 tax rate – or involving Proposition 193 if it is real property,  not left by the parents, but by grandparents.  

Property Tax Transfer: You say ten times less on expenses versus paying for it yourself?

Tanis Alonso: Absolutely. It costs the families we help far less to get a trust loan from us, believe it or not, then it does if they were to dig into their own savings to complete the Proposition 58 property transfer process.

Property Tax Transfer: How does that translate in terms of real numbers?

Tanis Alonso:  Let’s say a property value is currently one million dollars and the current tax base is $1,200. If they were to get reassessed at current value that would be around $11,000 annually.  By someone keeping the property and obtaining a trust loan to properly buy out their siblings that allows the beneficiary that is keeping the property to keep parents property taxes, to retain 100% of the Proposition 13 tax base that was paid by their parents and keep that low property tax base of $1,200. This of course creates much greater affordability than if they were to improperly buy out their siblings and have that property reassessed. The loan to trust goes hand in hand with the Proposition 58 property tax transfer system, creating enough liquidity to equalize distributions, not sell, and allow a beneficiary to keep their parents property with their low property tax base. 

Property Tax Transfer: It sounds counter intuitive, doesn’t it.

Tanis Alonso: I know, it does sound counter intuitive – yet it’s true. All you have to do is run the numbers yourself, and you’ll see what I’m talking about. It’s a better way to be able to keep an inherited house in the family, and to keep parents property taxes, when there is a dispute going on that pits the beneficiary who wants to keep a house against the beneficiaries that want to sell that home. A home that a family has so many memories associated with; with such strong emotional attachments to. There are so many wonderful family memories that are attached to each home. And every home is unique and different in that sense, just as every family member is different and unique.

Property Tax Transfer: You mean emotional memories you can’t replace with cash, in fact you can’t buy for any amount of money.

Tanis Alonso: That’s right. Anyway, this process allows families to keep that home in the family. And that’s the most important point!

Property Tax Transfer: It is the crucial point.

Tanis Alonso: Absolutely. And as a person on the front lines for this firm, neither I or Commercial Loan Corp. view each trust loan scenario as simply a “financial transaction”. Nor do we see the home they’ve lived in for decades as just a “piece of real property”. To us, this a “piece of family history” in the making. And the process a family decision, not a “transaction”. We see our clients as real families that we’re helping, financially and emotionally, not just as clients signing a contract for a trust loan. For us it’s much more than that.

Property Tax Transfer: It’s very obvious that you really enjoy helping people… getting them money when they really need it – and saving them on the cost side in the bargain, with trust loans.

Tanis Alonso: Correct. We see them as real people that we’re able to help in a time of need. For us it’s so much more than cash and property – we don’t view it that way. We’re talking about family history here. Not just “another deal”.

Continued in Part Two…

Your Source for Timely, Accurate News and Information on Trusts & Estates, for California Proposition 13 and Prop 58

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Proposition 58 Property Tax Transfer

Proposition 58 Property Tax Transfer

Most Californians favor Proposition 13 & 58. And it’s worth pointing out that California Proposition 13, also called The People’s Initiative to Limit Property Taxation, voted into law as an amendment of the Constitution of California – is, after 42 years, even more popular today as it was when Californians voted it into law on June 6, 1978. (Interestingly enough, the same date memorializing the Normandy landings, D-Day on June 6, back in 1944.)

As a matter of fact, CA Proposition 13 was championed early on, and driven successfully through numerous political  obstacles, by the famous Howard Jarvis Taxpayers Association… whose  courageous and inspired CEO, Mr. Jon Coupal, took over the Chief Executive reigns in 1999, and is largely responsible for leading the charge for accelerated property tax relief in California… right up to the present.

With financial analysts now telling us that Proposition 13 has saved California taxpayers over $528 billion saving the average middle class California family more than $60,000 to-date… and counting – it’s no wonder at all that most Californians favor Proposition 13 & 58!  In fact, as Mr. Coupal and his Taxpayers Association tells us, Prop 13 has made everyone’s property tax in California more reasonable.  Click here to learn more more…

Yet even though a majority of home owners in California still support Proposition 13, and Proposition 58 – which has, since 1986, enabled home owners to transfer real property from parent to child, and vice versa, without beneficiaries being reassessed for present day tax rate increases, discussed here, in various posts, within this blog. Or, click here for more info and Q & A on Proposition 58 (and 193)… there is still a stubborn minority that opposes it… such as special interest politicos in the pocket of certain powerful people in the real estate business or public employee union bosses, some independent realtors, several ill-informed academics, and a few mainstream newspapers like the SF Chronicle and LA Times with an interest in big-bucks real estate advertising.

Generally, the opponents of Proposition 13, and Proposition 58 home transfers avoiding property tax reassessment… typically are after more cash from tax payers in California, especially some folks in the real estate business, and are still laboring under the long-held, dragged through the mud misconception that there would be more cash coming into the real estate business, and into state coffers, were it not for the lack of present-day real property value reassessment associated with Proposition 13 and Prop 58… directly affecting California tax revenue. Even though accurate data shows us that the California state government benefits from Proposition 13 just as much as tax-paying homeowners do from the lack of tax reassessment, allowing them to never pay more than a 2% increase in property taxes.

Let’s take a quick look at the actual state tax data. Overall revenue going to local government entities from property taxes throughout California was nearly $5.0 billion in 1978 to 1979… and by 2010 to 2011 real estate tax revenue was at $49 billion per year! An increase that is two and a half times the rate of inflation over the same period, furnishing California local government entities with a very robust stream of real property tax revenue.

On the human side, away from the economics of the issue, folks in California, prior to Proposition 13, before 1978, were seeing elderly neighbors, friends and senior relatives, being forced from their homes as egregious real property tax increases spiraled out of control — and in some areas literally doubled from one year to the next — as older friends and beloved elderly relatives living right next door on fixed incomes, could not meet these unfair tax increases and were cruelly pushed out of homes they had been living in, and raised families in, for over 40 years. neighbors were being forced from their homes.

After Proposition 13 was voted into law, Californians saw right away the benefits of a tax system that would limit annual tax increases to 1% to 2% max, and began to provided a stable system for everyone in California – from government agencies that depend on property taxes, to people like seniors and other various middle class home owners… turning what had become a dreaded system of out of control real property taxes – into a fair, predictable tax system year to year – no longer a financial nightmare for those who happened not to be wealthy, living on modest or fixed incomes.

Nonetheless, those opposing this most popular tax solution called Prop 13 by Californians, still continue dragging the same old tired arguments through the gutters and broken down political avenues used by real estate executives, politicians and newspaper editors to put forth their old, discredited arguments in Op-Eds and widely debunked opinions in Editorials, in the few newspapers that will allow them the space to air out their opinions — despite the fact that everyone knows most Californians favor Proposition 13 & 58.  The critics are tone deaf.

We present these issues objectively in this go-to free resource blog for people interested in Proposition 13 and Proposition 58 property transfers…. For those keenly interested in learning more about how to avoid property tax reassessment, and how to keep parents’ 1% to 2% property tax limits safely in place in California, out of the reach of irrational opponents… For those of us who want to know more about parent to child transfer and parent to child exclusion; about trust distribution loans, avoiding property tax reassessment, proposition 13 transfer, and how to keep parents property taxes and how to effectively transfer parents property taxes. And for those home owners who wish to educate themselves further on the subject of inheriting property taxes, property tax transfer, real property tax transfer or real estate tax transfer.

If these interests, and additionally related topics, describe you – then you’re in the right place. We welcome your opinions and comments, and we’ll add your text comments or audio/video commentary, if you have something new, valuable, or unique to add to the discourse here.

Part Two: Propositions 58, 13 & 193 – Critics and Benefits – with Guest Real Estate Exec Devin R. Lucas

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California Proposition 13 and 58

California Proposition 13 and 58

Conversation with Mr. Devin Lucas continues, from Page One…

Property Tax Transfer: Mr. Lucas, what is your opinion of Prop 13 critics, and we assume opponents of Proposition 58 as well, who continue to tell the media that the so-called split-roll measure is a great solution to local government  tax revenue shortages, and supposed pension under-funding?

Devin Lucas: Well, just because the local government thinks if they raise commercial property taxes that more revenue will flow into their coffers – this is silly. They’re not considering the fact that in the end the public will have to pay for the fact that commercial landlords and business property owners will raise rents on their commercial tenants. They’ll also be hiring less people.

Property Tax Transfer: So how does that work?

Devin Lucas: If businesses, stores, supermarkets, are  paying higher taxes – this will increase prices on everything – all goods and services purchased by consumers every day would go  consistently up, year after year, as their rents go up.  It’s ridiculous for split-roll supporters to think that magically all of a sudden they’ll have so much more money coming in and that will solve all their problems.

Property Tax Transfer: So who pays for all this in the end?

Devin Lucas: The public will pay for this in the end!  Even if their home taxes remain the same by avoiding property tax reassessment – all their daily expenses, day to day cost of things they need to live. They still need to buy bread and food and gas, don’t they? If that gas station owner’s property taxes go up, his gas prices will go up. He has to raise his prices to compensate for his increased taxes, right?

Property Tax Transfer: A business owner doesn’t actually have any specific obligation to raise his prices on everything…

Devin Lucas:  He has to survive! You know, that gas station owner’s property taxes can go up from $20,000 to $300,000… and who will suffer? With consumer goods, gas, utilities, clothes, food, basically all living expenses, all prices on goods and services going up? Consumers, of course. In the final analysis,consumers will suffer.

Property Tax Transfer: Thank you so much, Mr. Lucas, for talking with us today.  We greatly appreciate your time.

Devin Lucas: Thank you. Take care.

 

We trust Mr. Lucas’ forewarning will be heeded, so that California does not find itself slipping backwards, and in many ways forwards – into an entirely new set of unpleasant tax increases with a whole new series of jarring consumer goods and services price hikes, that would most likely occur, crippling many Californians who are just getting by, or perhaps are already saddled with numerous debts.

Devin Lucas, and seemingly most Californians, appear to believe it would be preferable to maintain Proposition 13 as is, leaving the consumer side alone, while keeping Proposition 58 as is, to be able to keep parent to child transfer of property low on taxes, avoiding property tax reassessment  or parent to child exclusion from present-day property tax reassessment.

California home owners feel very strongly about being able to maintain their parents property taxes… Without question, CA supports low rate property tax transfer; to be able to transfer parents property taxes, keeping their parent’s low rates intact… Just as Californians have grown accustomed to, when inheriting property taxes associated with inheriting a home and/or land from their parents, at any financial level. All in all, CA supports low rate property tax transfer simply by avoiding property tax reassessment at  present-day tax rates.  That’s all Californians want. Nothing complicated.  It’s really quite simple.

It’s refreshing to know that there are seasoned real estate professionals like Mr. Devin Lucas around, that do not approve of complicating matters with a confusing and unpopular “Split-Roll” property tax measure that bears the same name as the wildly popular 1978 Proposition 13 property tax shelter… Yet it is slated not to continue capping property tax rates, but to block the cap on property tax reassessment of commercial properties and industrial facilities all across California; thereby accomplishing the exact opposite affect – a tax hike   on businesses, with far-reaching consequences, that property owners in California have expressed extreme dislike and disfavor for.

Besides the clear cut popularity of Proposition 13, Californians of all incomes, residing in all areas, middle class to wealthy, have said repeatedly in surveys and polls that they’d also  prefer to leave Proposition 58 and Proposition 193 untouched, so loans to trusts, from trust lenders, are always available to citizens, whether it be a small trust loan,  or large loans to irrevocable trusts for families or for entrepreneurs – simply to help sustain a middle class or upper middle class lifestyle, household or business… whenever it’s needed.

Not that much has been written about Proposition 58 (a parent to child transfer of real property, or parent to child exclusion from avoiding property tax reassessment on any property at all) as well as Proposition 193 (grandparent to grandchild transfer of a home and/or land) so Click Here for more info on Proposition 58 and the ability to avoid property value reassessment on inherited real estate… For specific information on a related subject, property-based trust loans – Click Here.

Lucas Real Estate, property brokerage and real estate law, can be found at https://lucas-real-estate.com, if you or your family requires services such as Real Estate Sales; Real Estate Purchases; Family & Private Transactions / Propositions 58 and 193 (i.e. selling or gifting to children & grandchildren); Trust, Estate and Probate Sales / Trust Administration and Management for Real Property;  1031 Exchanges; plus numerous other residential and commercial real estate services for Californians.

Part One: CA Proposition 13, 58 & 193 – Critics and Benefits; with Guest Real Estate Exec Devin R. Lucas

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California Proposition 13 and 58

California Proposition 13 and 58

Our California property tax relief Blog had the privilege of interviewing well known realtor  Mr. Devin R. Lucas, CEO of Lucas Real Estate,  in Newport Beach,  California, on March 13, 2020.

Mr. Lucas is a seasoned real estate professional who is not only well versed in California real estate sales and purchases, but also provides  professional assistance with Family Transactions / Propositions 58 and 193 (i.e. selling or gifting to children, grandchildren, etc.); Trust, Estate, Probate Sales & Private Party Sales;  Management of Real Property; Landlord / Tenant Matters; and a host of other critical real estate services.

We found Mr. Lucas’ point of view unique, in that his take on tax relief afforded by the 1978 CA Proposition 13, is quite favorable, unlike some in the real estate business.  We should also note that we are not referring to the new 2020 Proposition 13, that has been accused of “tricking California consumers…” into believing the new Prop 13 is the same Proposition 13 tax shelter measure passed into law on June 6, 1978.  The original, genuine Proposition 13 initiative enabled property owners to avoid property tax reassessment at current tax values, and to keep parents property taxes when it comes time to transfer parents’ property… and, obviously, to transfer parents property taxes, naturally.

Inheriting property taxes was never so stable and predictable as when Proposition 13 went into effect in 1978, and when Proposition 58 passed in 1978, protecting tax relief for offspring going through inherited, gifted or sold property tax transfer.

In fact, this new Proposition 13 “Split-Roll” may ruin parent to child transfer of inherited real estate.  It is a totally different measure that has now been revised and put in front of voters, to try to eliminate tax relief benefits for industrial & commercial facilities and business properties in California.

This new property tax measure commonly referred to as Proposition 13 “Split-Roll” may ruin parent to child transfer of beloved, inherited homes and land that often reflects the love and caring aging parents have for their adult children.  This tricky tax would most likely create what many financial advisors and tax analysts call a “slippery slope”; sinking California back into an unstable tax system; with arbitrary,   unpredictable property tax increases; and the general insecurity and economic malaise among residential, commercial and industrial property owners that follows, as it did so many years ago, before 1978.

 

Property Tax Transfer: Mr. Lucas, thank you for speaking with us today.  We appreciate  you taking the time to chat for a few minutes.

Devin Lucas: My pleasure.

Property Tax Transfer: Is there anything viable or helpful with this new 2020 Proposition 13, and the so-called “split-roll tax initiative” being promoted by opponents of the 1978 Proposition 13 tax relief initiative and, by attrition, the 1986 Proposition 58 property tax transfer measure?

Devin Lucas: Let me tell you something. The government has enough money.  They don’t need to go after home owners.

Property Tax Transfer: Understood. Can you tell us what rings true for property owners, where Proposition 13, Proposition 58 and 193 are concerned?

Devin Lucas: For existing property owners… the key thing is that you can buy a property and have stability, knowing that your taxes won’t go up more than they should…   This creates a sense of security.

Property Tax Transfer: It does. Do you think there is any validity to the claim that because of Proposition 13, and Proposition 58, older  home owners are less likely to put their house on the market?  Thereby helping to shrink  the real estate market to some degree?

Devin Lucas: Well, people do stay longer in a house if they can avoid property tax reassessment. And yes it does benefit some older people. But, hey.  It’s not just a property, it’s your home. Why shouldn’t you want to stay in that home.

Property Tax Transfer: Why do so many tax analysts in California talk about the dangers of raising commercial and industrial property taxes with the 2020 split-roll tax measure?

Devin Lucas: Look… If you double taxes on landlords, rents will go up. By keeping property taxes low, rents stay low.  Look at it this way, if I sell consumer goods, and my rent doubles I’ll have to increase prices on all the consumer goods I sell. Right? It’s simple. Consumers pay in the end. That’s what a split-roll tax will result in.

Property Tax Transfer: How would a property tax increase from the split-roll tax affect landlords?

Devin Lucas: Landlords will pass increases on to their tenants that own a  business, right? Those business owners will increase their prices; salaries freeze or go down; hiring freezes… When property taxes for business owners go up $10,000 to $200,000 or $20,000 to $300,000 – what d you expect?  That’s what commercial tenants will do – pass on the costs to customers – the public.

>> For Part Two, Click Here…     

Part Four: As Attacks on Proposition 13 & Proposition 58 Falter and Weaken, Critics Continue On – Despite Growing Popular Support for Property Tax Relief

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Proposition 58 and Proposition 13 in California

Proposition 58 and Proposition 13 in California

Even as property tax transfer increases in popularity, and Californians continue to take advantage of Proposition 13 and Proposition 58, for residential and commercial property tax relief, critics of these property  tax shelters continue to be rabidly, and in many ways irrationally, irate with the same basic tax relief afforded to agricultural and industrial facilities, as well as other commercial properties, throughout California.

Moreover, all tax shelter benefits made possible by California Proposition 58 and Proposition 193 are equally unpopular with critics, with respect to parent to child exclusion (from property tax reassessment, Prop 58) and grandparent to grandchild transfer rights (avoiding  property tax reassessment, Prop 193).

On the other hand, countless property owners across California with different levels of income and property values, all enjoy the same ability to avoid property tax reassessment; so naturally property tax transfer increases in popularity, as Californians never have to pay property taxes based on present day property evaluations.

California home owners and business property owners are equally thrilled with Proposition 13 and 58 tax shelter protection… and frequently take advantage of these tax benefits by engaging with a trust lender, for a trust distribution loan, a trust loan made only possible by this type of tax relief. Loans to trusts, loans to irrevocable trusts in many cases, under protections afforded by Proposition 58, with parent to child, property tax transfer, tax relief; and Proposition 193 tax benefits, covering grandparent to grandchild property tax transfer.

Despite critics working off opinions, bias, and a lack of data other than purely anecdotal evidence,  they frequently claim to the media that property tax relief is the sole cause of state and local government tax revenue shortages, local California  government pension under-funding, the shrinkage of homes being available in the real estate market… and several other related items.

However, economists working off of verified data and statistics have looked this issue from a local and state tax-revenue-to-government perspective, and have stated repeatedly that the reason for any real estate market shrinking is largely due to economic trending; although they also concede that some shrinkage in the home market  is also somewhat affected by property tax shelters, although to a lesser degree.

Analysts and  economists, addressing claims of government revenue shortages, note that California city municipal workers, and state government employees, are actually at a higher salary rate than equivalent government workers in other states are. They say many California government jobs base rates, bonuses, raises and pension plans are way above national averages… and that this is the cause of any under-funding or shortages in government public funding and spending.

Some California economists have said, in compiling studies on the subject, that California government employees are the highest paid state and city employees in the country, with the most comprehensive benefits, as well as retirement benefits, and the most expensive pension plans in the country.

California state budgets, year after year, consistently surpass state spending records – and the California educational system is now enjoying a 66% increase, reportedly over the next six years. Public services are inferior in California, not because of Proposition 13 property tax decreases and tax relief for residential and commercial property owners – but because of political preferences, special interest groups and internal over-spending. Over-spending is the realistic cause of any problems arising from under budgeting and under-funding.

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Property Tax Transfer

California Property Tax Transfer

There are, as we all know, numerous reasons that California property owners support Proposition 13 and California Proposition 58.  Proposition 13, passed by voters on June 6, 1978 protects individual consumer and corporate owners of residential and commercial real property from current property tax reassessment, with the exception of completion of new property construction and/or a change in property ownership.  Proposition 58  was approved as a California constitutional amendment by voters on November 6, 1986 – to exclude transfers of real property between parents and children from property tax reassessment.  Moreover, CA trust loans keep parents property taxes low, insuring that an even distribution can be made.

Generally, this gives adult offspring the ability to keep parents property taxes – in other words, to retain a parent’s lower Proposition 13 protected property tax rate. This frequently results in families saving literally thousands of dollars every calendar year. Moreover, these activities open up opportunities for  companies like the Commercial Loan Corporation to help  California beneficiaries and heirs who are middle class, not particularly wealthy, to qualify for Proposition 58 property tax benefits, by providing bridge loans to trusts and probate estates in order for an even distribution to be made for these heirs and beneficiaries. This is precisely how trust loans keep parents property taxes low in California.

Since 1978, Proposition 13 has saved California taxpayers over $528 billion – which has saved every taxpayer in California more than $60,000.  The 1978 Proposition 13 tax shelter finally provided residential and commercial property owners in California with tax relief that has proven, year after year and decade after decade, to be reliable, predictable and secure.

California home owners and renters all enthusiastically support Proposition 13, being able to reliably avoid  property tax reassessment at current tax levels; as well as Proposition 58, with respect to parent to child transfer of property, and parent to child exclusion from property reassessment…  and Proposition 193, involving grandparent to grandchild property transfers, when inheriting property taxes – which has collectively enabled families to comfortably transfer real property from parent to child, and keep parents property taxes, without being reassessed with constant  property tax increases.

Renters in California support Proposition 13, due to the fact that most residential and business renters are aware that as long as their landlord’s property taxes remain low, their rent is likely  not to go up.  Whereas if landlords’ taxes in California go up – we can predict with mathematical certainly that business  rents will follow.  Landlords will more or less have no choice but to increase their tenants’ rents.

Naturally, this would affect stores, gas stations, offices, industrial facilities, and so on – and that would ultimately affect the cost of food, of business goods and services; of gas;  so forth and so on.  Everything would go up.  And consumers would be hit hard.   Which is basically why renters in California support Prop 13, even if they’re not property owners themselves. In fact — why mostly everyone in California with a sense of community and fairness wholeheartedly supports California Proposition 13, 58 and 193.

PART TWO: As Attacks on Proposition 13 And Prop 58 Weaken, Critics Continue on with Split-Roll Tax Effort – Featuring Jon Coupal, CEO, Taxpayer’s Association

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Proposition 13 and Proposition 58

Proposition 13 and Proposition 58

Our discussion with Taxpayers Association CEO Jon Coupal continues, focusing on the 1978 California Proposition 13 tax relief benefits for home owners and commercial property owners – and critics of real property tax relief throughout  the state, whose efforts to destroy or water down Proposition 13 and Proposition 58  appear to be faltering, although they continue their efforts nontheless, despite vast popular support of these property tax relief and property transfer tax shelter protections…

Property Tax Transfer: Other than that one example of a wealthy  show business family being able to rent out a secondary property they own, with the ability to keep parents property taxes in CA low, and transfer parents property taxes while avoiding property tax reassessment – is that the only robust example they have that interests the public.

Jon Coupal: Of course. Any other example they have either puts people to sleep or is just based on generalities and disinformation. One wealthy family saves on property taxes and makes a profit by renting out a luxury Malibu home, therefore all wealthy people in California are doing the same thing. And Of course this is largely untrue.

Property Tax Transfer: Absolutely. We couldn’t agree more. Thank you so much Mr. Coupal, for your time with us today. We greatly appreciate it.

Jon Coupal: My pleasure.

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The realtors that Mr. Coupal mentions, that are committed critics of the original 1978 California Proposition 13 and our ability to keep parents property taxes in CA, frequently conduct interviews with California mainstream newspapers and online media. They repeatedly point out that California state and local city government pensions are vastly under-funded… due mainly, they insist, to  the 1978 California Proposition 13 tax shelter.

However, many economists have looked at this, and have stated repeatedly that city municipal workers and state government employees throughout California are actually at a higher overall income rate than equivalent government workers in other states are.

California state and city employee base salary rates, medical benefits, raises and, in particular, pension plans and retirement benefits – are, reportedly, a great deal higher and far more comprehensive than equivalent programs in other states, counties, cities and towns. According to financial researchers, their pension plans are by far the most expensive pension plans in the country.

State budgets consistently surpass state spending records – and the California educational system is now enjoying a 66% increase, reportedly over the next six years. When you peel back the layers, and really examine the facts and statistical data, it seems that public services are inferior in California, not because of the mega popular 1978 Proposition 13 property tax relief benefits for residential and commercial, as well as industrial, property owners. Not because of the ability to keep parents property taxes in CA, or the right to transfer parents property taxes when inheriting property and therefore  inheriting property taxes that go along with it… Not because of property tax transfer or avoiding property tax reassessment during  parent to child transfer, known as parent to child exclusion – but because of political preferences, special interest groups, and over-spending on those interests.

The facts appear to be pointing at apparent cycles of overspending, year after year on specific items such as local government employee salaries and bonuses, generous pensions, retirement perks, and reportedly “very generous” benefits, and other seemingly related areas.

These specific expenditures certainly do seem to be the reason certain popular programs created to help the general public are now severely under-funded. When you look closely at the facts, it certainly does seem that over-spending in certain areas are causing under-spending in other areas.

>> Click Here for Part Three…