Will California Prop 58 Tax Breaks Survive Proposition 19?

Will CA Prop 58 Trust Loans and Tax Breaks Survive Proposition 19?

Will CA Prop 58 Trust Loans and Tax Breaks Survive Proposition 19?

California can thank her lucky stars that Proposition 15 was defeated by a thin margin of “No!” votes… But these motivated opponents of property tax relief in California managed to raise  and spend, thanks to the CA Realtor’s Association and others, $47,568,642.14 to push  through a certain cleverly worded, deceptive little tax measure called Proposition 19; as the state’s first serious property tax in 43 years. 

Opponents to the Prop 19 tax measure  managed to raise a paltry $238,521. Had they been able to raise equivalent amounts of cash for PR and promotional efforts, to properly inform voters as to what Proposition 19 was actually looking to accomplish — it is unlikely that the tax measure would have passed.  As it is, the winning margin was only a few hundred thousand votes. 

Proposition 19 was a Christmas present in 2020 for certain special interests  in California, supported by the CA Legislature – the  CA Association of Realtors PAC, the National Association of Realtors,  the California Democratic Party,  California Professional Firefighters Ballot Issues Committee, and others…  designed to be presented as a pro middle class, pro-senior, pro-firefighter, pro-education property tax relief package – when in fact no one really knows how much all of that anticipated extra property tax revenue is actually going to seniors and the California school system, and firefighters. 

Certainly, the folks behind Prop 19, the California Legislature will  throw a few dollars at the Firefighters’ Union… and make things, at least on the surface, appear to be easier for homeowners over 55, for awhile…. and the schools system will receive some of that revenue no doubt.  However, according to well connected real estate lawyers,  as well as the folks at the Jarvis Taxpayer’s Association,  most of the extra revenue will be used to pay for massive, unfunded government employee pensions and related items.  How this unfolds remains to be seen.

What also remains to be seen is the next Proposition 15 type of anti property tax relief tax measure, that will be looking to strip away certain established Proposition 13 tax breaks.  And no doubt with a more clever and convincing marketing effort next time around.  And   having learned a thing or two from their success with Proposition 19, how to sell new property taxes to residential and commercial property owners in California. The Howard Jarvis Taxpayer’s Association and others will simply have to learn how to debunk and expose new property tax hikes, of any kind, more rapidly and more convincingly.  

In the meantime, California still has some effective property tax relief options left, thanks to Proposition 13 still being in one piece.  If we’re about to inherit property, from a trust or an estate, we can still look at getting a trust loan while establishing a low Proposition 13 property tax base… even without all of the property tax transfer options that heirs and beneficiaries are accustomed to passing on to their children as well… allowing their children to benefit from standard Proposition 13 tax breaks for California trust beneficiaries  to avoid property tax reassessment.

Families inheriting real property can still transfer parents property taxes upon inheriting property taxes; plus utilize their ability to safely keep parents property taxes during a parent to child transfer, or Parent to Child Exclusion; as well as during the transfer of property between siblings,  during a co-beneficiary buyout of inherited property shares through a loan to an irrevocable trust in conjunction with Proposition 58, and the help of a reliable trust lender who knows how to make full use of the  now-revised Parent to Child Exclusion… now restricted to a 12-month time-frame after a parent passes away; as opposed to no restrictive  time-frame, such as prior to Proposition 19.  
If California can’t take advantage of property tax relief one way – they’ll have to go down another avenue to get it done!  Inheriting parents property taxes, maintaining the right to avoid property tax reassessment, is still in place; it’s just not as simple as it once was. Thankfully, Proposition 13 still protects our right to avoid property tax reassessment, due to the fact that Proposition 13 is still intact, for the most part. But for how long? That’s the big question… before those tricky folks who gave us Proposition 15 and Prop 19 decide to try again, having learned from their “mistakes”, and come back in the near future with even more deceptive marketing capabilities.

Of course, in the bulk of the states in America, most tax breaks of any kind go the wealthiest residents who actually need tax reduction the least. However, in California the middle class, nor just the one-percenters, continues to enjoy these unique Proposition 13 and Proposition 58 or Prop 193 tax breaks.  Even after Proposition 19 imposed limitations on the right to avoid property tax reassessment. 

The longer middle class homeowners in California have lived in their house – factoring in their neighborhood, in terms of appreciation in value – the larger the tax break from Proposition 13 still is, as it always has been. And Proposition 58 remains about the same, allowing beneficiaries to get a large six or seven-figure loan to an irrevocable trust… establish a permanent low property tax base, plus buyout co-beneficiaries who have inherited the same property.

Despite Proposition 19, all property owners are protected from property tax increases, regardless of when their buildings were built or whether the owner even lives in them. Unfortunately for renters, rent control in Los Angeles and other urban areas only applies to multi-family apt. buildings that were constructed prior to 1979 — the rest of renters cannot partake, however can usually find reasonable rentals, where say in many other cities in the US this is often not possible. But it is in California.

Now, if we could get other taxation down, and make living easier for Californians in general, and stop companies from leaving the state due to high corporate tax… keeping jobs here in the state – California would be in better shape all around.  But that’s something we’ll need to take up with the Legislature!

With Prop 19, Can we Still Inherit A Home And Retain the Property Tax Base?

With Prop 19, Can we Still Inherit A Home And Retain the Property Tax Base?

With Prop 19, Can we Still Inherit A Home And Retain the Property Tax Base?

In opposition to what some California newspaper editorial writers,  ill-informed politicos, or ambitious realtors might tell you, California Proposition 13 is not broken.  In fact it’s doing exactly what it’s supposed to be doing.  As they say, “If it ain’t broke – don’t fix it!”

Voters in California, in 2020,  fell victim to a great deal of deceptive public relations and marketing, painting Proposition 19  as a “friendly” property tax… versus “unfriendly” property tax relief.  Always avoiding property tax reassessment  was framed as mainly benefiting wealthy families so they could rent out secondary, non-primary, properties to supposedly get even wealthier by renting these properties out – “starving” the state of much-needed revenue for schools, firefighters, and the Legislature in general.

The fact that Proposition  58 and Prop 13 property tax breaks have been allowing middle class homeowners to basically survive, saving Californians from losing their home; or being able to keep inherited property without going broke… apparently was not  important to the politicos in the capital.

Avoiding property tax reassessment at high current rates, and enabling beneficiaries to avoid having to sell their inherited property, plus being able to lock down a low Prop 13 property tax base and buyout siblings who urgently needed to sell their inherited property shares, through a trust loan working in concert with Prop 58’s Parent to Child Exclusion or Parent to Child Exemption – didn’t seem to matter at all to the folks running the state.  Tax relief like this for the middle class, as opposed to being available only to wealthy Californians, didn’t, and doesn’t, seem to be a priority, interestingly enough.

Opponents to property tax breaks for middle income residents  loaded up their promotional advertising with deceptive language and confusing explanations… Avoiding property tax reassessment was characterized as something you shouldn’t want to do; and voters were convinced they were not harming  themselves financially, as homeowners, or as trust beneficiaries and heirs to estates; and should be delighted that they were now helping seniors and firemen and schools.

In fact, they were actually helping the Legislature pay for unfunded government pensions with a rather vague financial support system for the firefighter’s union and educational system throughout the state.  The benefits were left open as to the “how” and “how much”, and written that way intentionally.

However it worked.  Proposition 19 passed… but just barely.  If it had been presented clearly,  in a straight-forward fashion – it would never have passed.  Many people voted for Proposition 19 without realizing its full implications.  In fact there  is a 160-plus page Assessor’s Handbook “AH401” that has literally been deleted from the Board of Equalization’s website because of changes brought about by Proposition 19; hence California property laws are being rewritten as we speak.

If you look at all this in depth, you can clearly see that if  Prop 19,  had been allowed to go all the way, in terms of completely stripping out homeowners’ and beneficiaries’  right to be always avoiding property tax reassessment…  this would have crippled the  middle class in California.  And it certainly will present some economic challenges to the middle class… however it stops short at being a complete disaster.

Property owners can still take the right steps for avoiding property tax reassessment, can still buyout co-beneficiaries, can still establish and maintain a low property tax base. With a few limitations.  Let’s just say it could have been a lot worse for middle class families.   And that is where these critics of property tax relief are probably heading – so Californians have to keep their eyes open.  But at least now, as many California homeowners and even renters  nurse their buyer’s remorse – they will be prepared if these incessant opponents to property tax relief come back around again to “finish the job”.

A lot of Californians don’t understand how complicated property tax relief is going to be going forward.  Every homeowner is going to need a Proposition 13, Proposition 58 and Proposition 193  expert to address these changes – to take full advantage of the Parent to Child Transfer, or Parent to Child Exclusion, and to analyze their property tax situation realistically;  with the help of a property tax expert.  To see if they are going to have to move into an inherited property within 12-months, and use it only as a primary residence,  to evaluate if that’s even going to be possible after the parent leaving them a home passes away.

All these property tax relief matters that were once so simple, that were implemented simply by habit before Proposition 19 came about, are now going to need expert input from well known property tax specialists like Prop 13/Prop 58 Consultant Michael Wyatt, or property tax relief real estate attorney Devin Lucas… Or trust loan and Parent to Child Transfer experts at a firm like  Commercial Loan Corp who fully understand how to make use of the exclusion for reassessment of property taxes on transfers between parents and children.

Professionals like that will be needed to side-step  mistakes and not miss out on always avoiding property tax reassessment – ending up paying property taxes at current high rates;  hopefully inheriting property taxes form parents.

Beneficiaries and homeowners are going to have to be incredibly careful when looking to  transfer parents property taxes, with the goal being  to keep parents property taxes on a property tax transfer, using the time honored Parent to Child Transfer,  or Parent to Child Exclusion.  The same applies to going to a trust lender, for example, to get a loan to an irrevocable trust to be able to get approved for Proposition 58 for the transfer of property between siblings – commonly known as buying out a siblings’ share of house – buying out siblings’ property shares,   Or the buyout of co-beneficiaries’ property shares.  Now not as simple as it once was.  But still do-able, working with the right firm who will lead you in the right direction and evaluate your property correctly.

For instance, without expert assistance it’s very easy to accidentally trigger a property reassessment under Proposition 13 that might very well increase your property taxes 10 or 20 times, for yourself or for your heirs or beneficiaries.  It’s so easy to handle a transfer of property incorrectly, without a specialist helping you, meaning a property tax consultant, or trust lender if you want to buyout annoying or dishonest siblings…Or a real estate attorney familiar with Prop 13 and Proposition 58.  It is easy to make an error in a Trust that kills your tax cap that would have saved you thousands of dollars.  Doing these things on your own is terribly risky.

When Prop 19 does into affect  on Feb. 16, 2021, California Prop 19 will change a parent’s ability to leave their children or grandchildren their Proposition 13 protected tax base.  Property will be reassessed at its current fair market value, unless you get expert help to identify a work-around or property tax reduction solution.  Challenges will exist where there were none before… so finding some experts you can trust will become an essential step going forward.   

Proposition 19 Tax Hike Versus Proposition 58 Property Tax Breaks

Proposition 19 Tax Hike Versus Proposition 58 Property Tax Breaks

Proposition 19 Tax Hike Versus Proposition 58 Property Tax Breaks

The slim-margin success of California property tax hike Proposition 19 has been due to an odd combination of elements. Not held up by a great deal of media support – yet enjoying all the benefits of a massive promotional budget, with first-rate brand awareness and PR; etc. – allocated by several established high-profile organizations lending a great deal of credibility to the Proposition 19 campaign.

Proposition 19 concentrated on the (supposed) well-being of seniors; on the enhanced profitability of the California realtor community, and on the escalated financial health of the state educational system.  Although  all the Proposition 19 public relations language supported all those focus points… how sincere it was remains to be seen.  Oddly enough, press and media support never mirrored the robust financial support that Proposition 19 enjoyed.

Only a handful of organizations such as ACLU of Southern California, the Family Business Association of California,  the Howard Jarvis Taxpayers Association, and League of Women Voters of California supported the effort to defeat Prop 19 – coming up with a mere $58,000 to support and protect Proposition 58, Proposition 13, and the right to continue transferring property taxes…

Meanwhile, a  tremendous parade of well heeled organizations backed the Proposition 19 tax initiative, and fought hard to get it passed, donating  some  $46,458,168.88… The astounding amount of capital raised to get the proposition passed was led by the California Association of Realtors, donating a stunning $35,710,000;  National Association of Realtors, with $4,823,500; California Professional Firefighters Ballot Issues Committee with $100,454; and the Operating Engineers Local Union No. 3 Issues Advocacy/Ballot Initiative PAC with $10,000.

Other supporters were California Senior Advocates League, California Statewide Law Enforcement Association, Californians for Disability Rights, Congress of California Seniors, California State Federation of Labor, CalAsian Chamber of Commerce, California Black Chamber of Commerce, California Business Roundtable,  California Forestry Association, California Hispanic Chamber of Commerce,  and  the California NAACP State Conference – just to name a few.  The full list of supporters is extraordinary. 

The California Legislature boldly claims that local governments and schools could “gain tens of millions of dollars of additional property tax revenue every year…” These extra revenue gains, they anticipate,  “might grow over time… to a few hundred million dollars per year.” “Might” and “could”…  But no one knows for sure.  Many feel these numbers are exaggerated.

Did those politicos running California, along with the real estate  organizations who had enough in their war-chest to throw $40,000,000 at this tax bill – ever consider that a large number of family farms and other companies will go under, as they have said they are in danger of doing due to overly high taxation, Covid, and poor sales… and will stop paying taxes altogether at that point. 

Did they ever consider that  if you unravel California’s right to transfer property taxes when inheriting property taxes from parents… or limit beneficiaries’ ability to keep parents property taxes, nothing but economic trouble will follow. Tampering with the right to take advantage of property tax transfer benefits, or the transfer of parents property taxes upon inheriting property taxes… or limiting a families’ ability to get a trust loan to buyout a co-beneficiary’s inherited property, to take advantage of Proposition 58 to avoid property tax reassessment… will do nothing but confuse  the tax system. 

Property tax transfer, namely the right to transfer property taxes, parent to child transfers and parent to child exclusion, is always dangerous to play games with; or to try to  “fix”  a system that isn’t broken… that has been in place for decades, working well for property owners and requiring no need of fixing.  

Many who are not in danger of going under have claimed they are fed up with  the high cost of doing business in California — and tax hikes of any kind would push them over the line, forcing them to leave California for more corporate-friendly states, with lower taxes in general.  They may not have the right to transfer property taxes in a new state, however their income tax and living expenses in general are likely to be far less expensive than in California.

Did any of the short-sighted folks pushing property tax increases like Prop 19, limiting and even removing the right to transfer property taxes as well as high income tax, ever stop to consider that in the final analysis California loses out on a lot more tax revenue going down this avenue.  In fact, if you examine the ten highest income tax states (or legal jurisdictions) you see right away how high taxation already is in California, even  before property tax increases…

  1. California 13.3%
  2. Hawaii 11%
  3. New Jersey 10.75%
  4. Oregon 9.9%
  5. Minnesota 9.85%
  6. District of Columbia 8.95%
  7. New York 8.82%
  8. Vermont 8.75%
  9. Iowa 8.53%
  10. Wisconsin 7.65%

Not only that, if you factor in the thousands of good white collar and  blue collar jobs that exit with those companies when they leave the state, take note of the fact that those jobs are gone forever!  Moreover, all those workers put an additional strain on the system, collecting   unemployment checks plus no longer themselves paying out taxes on the level they were before… Many of them in fact leaving the state to find work in nearby states with lower taxes and lower living expenses. Again, less tax revenue going to the California.  Did this not occur to anyone in the State Government, smart folks with PHDs and MBAs and law degrees…? You would think it would have.

Opposition in the Press

Yet with all that financial support – press and media support was stunningly low, in terms of support for Proposition 19.  Editorial Boards opposing this property tax ballot looked something like this:   

• The Orange County Register Editorial Board: “But Prop. 19 is best understood for what it is: an attempt by real estate interests to accomplish what they couldn’t accomplish two years ago by pandering to the state’s firefighters union. This is a special-interest measure that seeks to raise hundreds of millions of new tax revenues to appease yet another special interest. Prop. 19 has one good feature — portability. Counties ought to enable it forthwith, as a few already have done. But Prop. 19 is a cash grab, not tax reform; it’s not fair to property heirs, and it buys off a union so it has a better chance of passing. Vote it down.”

• Mercury News & East Bay Times Editorial Boards: “Prop. 19 merely plugs one hole in the state’s porous property tax laws while creating another. It’s time for holistic reform that simplifies the system and makes it more equitable. This isn’t it.  The longer a person had owned their current home, and already benefited from inordinately low tax bills due to Prop. 13, the greater the tax break on the new property. And those who downsize would often be competing with first-time buyers for more-affordable smaller homes. The real reform would be to abolish the tax-transfer program, not expand it. Vote no on Prop. 19.”

• The Bakersfield Californian Editorial Board: “Proposition 19 is another do-over on the ballot. Two years ago, the real estate industry spent $13 million on a similar initiative campaign to expand the program statewide and enhance the benefit for eligible homeowners. Sixty percent of voters rejected the initiative. They should do the same this year.”

• Los Angeles Times Editorial Board: “But Proposition 19 would just expand the inequities in California’s property tax system. It would grossly benefit those who were lucky enough to buy a home years ago and hold onto it as values skyrocketed. It would give them a huge tax break and greater buying power in an already expensive real estate market. It would skew tax breaks further away from people who don’t own a home or who may be struggling to buy one.”

• San Francisco Chronicle Editorial Board: “But it’s still a flawed package, designed to rev up home sales that benefit real estate agents who could reap more in commissions. It favors one narrow segment of the tax-paying public but does nothing for the rest of the state’s home buyers. The measure shows the convoluted extremes that California’s tangled property tax system produces.”

• The Desert Sun Editorial Board: “What seems clear is that the main backers of this measure — Realtors and the firefighters union — stand to gain greatly in the forms of expected increased home sales and related sales commissions and the measure’s dedication of some of the state’s ultimate new tax proceeds specifically to firefighting efforts. Firefighting must be a priority of state and local governments. Budgeting for anything so vital by this type of special interest ballot measure is the worst way to do so. Lawmakers should be making such key spending decisions in their regular budget work.”

• The Press Democrat Editorial Board: “Proposition 19 would allow people to buy more expensive homes anywhere in the state, while capping their property taxes. Moreover, they could repeat the maneuver three times. That might provide lots of business for real estate agents, but it would undercut school districts and local governments, the beneficiaries of property taxes. […] California’s tax system is overdue for an overhaul, but these measures make piecemeal changes that are as likely to create new problems as solve old ones. The Press Democrat recommends no votes on Propositions 15 and 19.”

Editorial Boards supporting this property tax ballot was slim, and looked something like this: 

• San Mateo Daily Journal Editorial Board: “This would enable people in high cost areas to move more easily, opening up room for new residents to the area.”

• The San Diego Union-Tribune Editorial Board: “While critics see this as a gift to the wealthy elderly, the great majority of older homeowners are middle-income, not rich. Allowing them (as well as disabled homeowners and wildfire or disaster victims) to downsize without suffering a huge property tax hit is a humane policy that helps people retire with much less financial stress. It would also promote fluidity in home sales, increasing the availability of larger homes for families with children.”

And so the debate continues… 

Proposition 19 and the Impact on Prop 58 & Property Taxes in California

Proposition 19 and the Impact on Proposition 58

Proposition 19’s Impact on Proposition 58

On Election Day in November of 2020, a tiny margin of votes in California swayed the outcome to pass the California Association of Realtors’ effort to convince California voters that Proposition 19 was a marvelous new property tax break to help older homeowners and families inheriting real estate from parents and grandparents.

Also, there was an extremely clever sentimental component built into the Proposition 19  marketing campaign; that was designed to sway voters with a promise to use a good deal of the projected increase in property tax revenue to beef up budgets for fire-fighters… and the educational system. So who on earth would object to revenue going in those directions?  Obviously, no one.  When in fact, from what we hear, very little revenue will actually be going in that direction, and instead will reportedly be used to pay for unfunded state government pensions “and/or related needs…”

All those opposing this property tax measure wanted homeowners over 55 and those who are “severely disabled” (and naturally this will affect a certain number of  older residents) to continue to keep the same number of times they can transfer their tax assessments.

Proposition 19 marketing language dances around this “severely disabled” issue… avoiding specific guidelines for Californians as to what marks the difference between “normally” or “moderately” disabled, let’s say… and “severely” disabled!  And instead, allows homeowners who are  over 55, and reportedly “severely disabled”, or whose homes were destroyed by wildfire or some other “natural disaster” – to transfer their primary residence’s property tax base value to a replacement residence of any value, anywhere in the state.

Jon Coupal, President of the Howard Jarvis Taxpayers Association, summed it up pretty well when he said, “Proposition 19 is an attempt by Sacramento politicians to raise property taxes by removing two voter-approved taxpayer protections from the State Constitution. This measure would require reassessment to market value of property transferred from parents to children, and from grandparents to grandchildren.”

The small print, and in fact in this case micro-print, continues to give folks inheriting property from parents the ability to avoid property tax reassessment… but only if they use the property as a primary residence, and only if they move in within 12-months after the parent passes away. 

As long as this deadline is met, Prop 19 apparently does not violate the Proposition 13 transfer of property,  or property tax transfer in general… And for beneficiaries looking to sell their property shares, there are trust fund solutions to help avoid beneficiary conflicts tied into Proposition 58 and Prop 13 tax breaks, for California property owners, or to work around the new Proposition 19 property tax obstacle that forces homeowners to move into inherited property within one year or lose the “Parent to Child Exclusion”. 

Californians will still be able to transfer parents property taxes when inheriting property, and inheriting property taxes from parents –  beneficiaries can keep parents property taxes, there is no other assessment or reappraisal imposed on the Proposition 58 Transfers Between Parent and Child; Grandparent and Grandchild as discussed on the BOE site in the section regarding the Proposition 58 Parent to Child Exclusion or Parent to Child Transfer; or on any other transfer of property between siblings, such as a buyout of co-beneficiary property shares.         

“Severely disabled” is pretty vague language however.  How can you actually define that, with parameters that California trust beneficiaries, estate heirs, and homeowners can follow? Clearly, you cannot.  

Proposition 19 waters down the Proposition 58 Parent to Child Exclusion or Exemption to some degree, although we can still work with it, but it limits property tax breaks, as they say, for “certain transfers of real property between family members”. Proposition 19 limits the exclusion from reassessment for transfers from a parent to a child of $1 million of fair market value. If the property value exceeds $1 million, it will be partially reassessed but not to full market value (i.e., FMV less $1 million). If the child/beneficiary does not use the home as a primary residence, it is reassessed at full market value (FMV).  Naturally, Proposition 19 is not retroactive and will not apply to any property until it is transferred (or deemed transferred) after Feb. 15, 2021.

So far, Proposition 19 is mainly impacting the Proposition 58 Parent to Child Exclusion From Property Tax Reassessment; and the limits they reference refer only to the 12-month deadline plus beneficiaries using a property tax transfer when inheriting property taxes only for a primary residence – not for an investment property that can be rented out. They claim to be expanding tax benefits for transfers of family farms as well, although we don’t know precisely what this entails.

Children or grandchildren who inherit their parents’ or grandparents’ primary residence but do not move in as their own primary residence will be re-assessed at current market value. This will affect many families, like established family farms. For example, if a family farm that was purchased for $300,000 (600 acres at $500 per acre) a generation ago with a tax bill of $3,500 – this could be reassessed by the tax assessor to be $6,000,000 (600 acres at $10,000 per acre; price per acre could vary depending on market area) resulting in a tax of approximately $72,000.

How are families supposed to deal with this sort of tax hike? Could the California Legislature be this greedy for extra tax revenue (i.e., that they were doing perfectly well without for decades) as to completely ignore the ability for families to survive under these sort of extreme property tax conditions? In the long run, how does thousands of family farm businesses going bankrupt possibly help California?

This significant property tax increase could affect many family farms that were once profitable in terms of basic survival going forward under these tax conditions. So you understand all this and can make sense of all these details? No? Well get in line because short of attorneys and CPAs, no one else understands all the fine points either!

Why Californians Need Proposition 58 and Enhanced Property Tax Breaks

Why Californians Need Proposition 58 and Enhanced Property Tax Breaks

Why Californians Need Proposition 58 and Enhanced Property Tax Breaks

As we all know, Proposition 58 has been tampered with, in the form of Proposition 19; finally giving the CA Legislature the opportunity they have been waiting for, for decades, to water down property tax relief in California.  However, despite this, the state still has property tax relief options that are materially sound. They certainly should not be taking payment plans seriously, that are  offered up by California Governor Gavin Newsom as a realistic  way to “help” homeowners that owe the state on past due property taxes.

Sure, why not allow property owners to pay off what they owe more slowly. But the Governor and his team should also be looking at far more robust options, where homeowners can actually spend less, and save more.  So middle class residents can access the type of tax cuts and property tax breaks that rich folks have enjoyed for decades.

For once, we’re talking about tax cuts for middle class residents, the type that upscale beneficiaries receive through high-end tax attorneys and expensive CPAs; with a trust loan, in concert with tax benefits from Proposition 58… which enables them to buyout siblings who own a share of the house their family has inherited. So they can own an inherited home by themselves, with a low Proposition 13 property tax base.

For many middle class heirs, it’s a perfect package.  Although you still have to use Proposition 58 within year one after mom or dad passes… to utilize the CA Parent to Child Exemption – if you want to continue inheriting your parents’ property taxes.  To avoid paying property taxes at present market value, in order to keep parents’  low property taxes, completely avoiding property tax reassessment. 

In order to prevent a cleverly disguised Proposition 19 or Proposition 15 type of tax measure to come along and weaken, or even remove, property tax breaks for middle class residents – California needs to strengthen the state’s property tax laws, and cement measures that,    despite Proposition 19, still  can guarantee the right to a property tax transfer with a parent to child exemption, or parent to child exclusion; as long as you have a reliable trust lender you can depend on, for example like the Commercial Loan Corp. in Newport Beach, who can be reached at 877-464-1066.  They apparently have the resources to not only provide the money to equalize co-beneficiary funding, establishing a sibling-to-sibling property buyout,  with a low property tax base to avoid property tax reassessment. 

All of the details that make up the foundation of this process are  verified on blogs like this  one, Property Tax Transfer, or the micro-site that furnishes a deep dive into Proposition 13 and Proposition 58  details and narratives: Trust and Estate Loans.   And for those that prefer the hard cold facts and only the facts, there is the respected  state government Website, the California State Board of Equalization, that provides arguably the most  objective property tax relief overview available anywhere, concerning

Despite the inconveniences imposed by Proposition 19, California still has an intact, robust Proposition 13, and fairly intact Proposition 58 as long as one doesn’t exceed that first 12 month deadline period after the death of a surviving parent, or decedent… and one is sure to move into an inherited home as a primary resident, not renting it out, since this is sole bone critics of Proposition 13, Proposition 58, and the CA Parent to Child Exemption have been gnawing at incessantly for decades – using the Bridges family as their one and only example, over the past 40 years, believe it or not.

The problem with Proposition 19 forcing you, after inheriting property from your parents, to move into your parent’s home as a primary residence, or lose your ability to avoid property tax reassessment… on top of being forced to sell your own home, is the fact that your parent’s house may be too small to suit your family. Or the school district may not be suitable, or may be too far away. Or the commute to your job, after moving, may add an hour or more each way, causing another problem.  No one in the Legislature asked those questions; or even considered these issues as potential problems.

Moreover, the question has arisen among critics of Proposition 19 – is this simply a step to get us to the point where they lower the boom on us – and completely remove the parent to child exclusion, effectively wiping out this critical tax break altogether?  The question has come up… however, no one really knows the answer.

These days, post Proposition 19… California homeowners trust the State Legislature less than ever.  Once it sank in how they had been misled  by Prop 19, and had actually been duped into voting for it.   Luckily, there was enough push-back on this to prevent the CA Legislature from going too far. There is enough property tax relief in the system to be useful to the middle class… to help families that really need this kind of tax break. 

Even if Proposition 19, in terms of property tax relief and it’s front-runner tax break, the CA Parent to Child Exclusion or  Exemption, is like walking around with a sprained ankle… Californians, unlike middle class homeowners in 48 other states, will still have property tax relief to turn to. Even if it does create an inconvenience for homeowners and inheritors of real property, and does need to be repealed in the near future.  It won’t be so easy for the California Legislature communications team, and the Realtors Association press release copywriters, to spin the issues with a deceptive branding campaign and confusing marketing language mis-characterizing the CA Parent to Child Exemption… On the next go ’round it will be a very different story.

What We Need

For one, California needs property tax relief with iron-clad protection, to remain safe from any Proposition 19 or Proposition 15 type of tax obstruction or property tax hike that may come along in the near future to water down or even remove crucial property tax breaks.  Not property tax deferment, as the Governor of California has proposed… Or a payment plan to give folks owing property taxes a little more time to payoff what they owe, as proposed in San Diego by two County supervisors.  To be frank, these suggestions are stingy, and are half-way measures at best. 

Proposition 19 has made the Parent to Child Exclusion challenging enough. So why not propose enhanced property tax relief options now, in the midst of a seemingly endless pandemic.  Where most  Californians are struggling… even impacting the upper middle classes now – upscale homeowners, high-end business property owners, commercial property owning landlords with office or residential tenants, or beneficiaries inheriting property from parents…

Payment plans or deferred tax payments are not what homeowners need. They need help in terms of being able to spend less… as making more is very difficult right now.  So at least let’s help them to spend less! Significant property tax breaks will help accomplish that. Gov. Newsom must be able to see this.  He is not so dense as to miss that point.  We are sure he and his team can come up with some enhancements to what we already have. Roll back Prop 19 for one. Repeal it immediately, as unemployment continues to follow the Covid health disaster like an evil twin!

Then add components to Prop 58, instead of watering it down.  That will help middle class homeowners and commercial property owners to spend less on property taxes.  Tax breaks exactly like the billionaires have – at the disposal of the middle class.  Why should only they and not the middle class and upper middle class have authentic tax cuts?  And plan, then launch, a generous STATE Stimulus Package that will create jobs and heal the sick, as well as preventing any new infections with preventative vaccines that are reliable. This is a good start.

California Proposition 19 Lenders and Irrevocable Trusts

California Proposition 19 Trust Loans

California Proposition 19 Trust Loans

Post Proposition 19 Californians must face certain  changes to the Proposition 58 “Parent to Child Transfer” tax break, the “Parent to Child Exclusion”. 

Property owning Californians now have to grapple with specific challenges, where property tax relief is concerned. It has to be said that, with all due respect, that the realtor community  in California is straining credibility.  They backed Proposition 19, so anything they propose going forward, concerning property taxes or property tax relief, we can assume is only going to benefit the California realtor community.  Not the buyers, or renters…  or owners.  This is fairly obvious. 

Frequently being the wealthiest of the wealthy, we find it ironic that many realtors in California bleat and moan about one family – the Bridges family in Los Angeles – using the one often repeated example to advance the shaky case that everyone in California benefiting from Proposition 13 and Proposition 58 are fabulously wealthy, are elderly, and are intent on buying up all the multi-million dollar beachfront properties in the state, simply to rent out to other fabulously wealthy people from other states, vacationing in Malibu or Santa Cruz or Santa Barbara, having a grand old time – while the besotted realtor community suffers terribly from the lack of homes available to them to go to market. These claims basically debunk themselves.

Moreover, as the claim goes, all because of Proposition 13… and all those rich movie stars buying up all those luxury properties so they can make a few extra dollars every month, reportedly $10,0000 to $15,000, renting out an inherited investment property, like the Bridges do, or did. Again, Bridges being the only name ever used as an example, repeatedly in articles and editorials. Or are the Bridges the only family ever to be involved in this peculiar practice?

We simply cannot figure out why these rabid critics of property tax relief, practically foaming at the mouth, cannot locate another wealthy show business family to bring up when discussing this supposedly “out of control” practice of renting out inherited beachfront properties to vacationers at fairly egregious prices.

Apparently, according to critics of Prop 13 and Prop 58, it’s all because of the families  taking advantage of the “Parent to Child Exclusion” that the real estate market has shrunk a few percentage points over the past few years.  Utilized only, they tell us, by wealthy elderly homeowners and their offspring. No one else. No middle class families, no veterans, no retired folks living on a fixed income.  

And this argument, involving the Bridges family as the sole example of a family of multi-millionaires using an inherited home as an investment property to make a few extra dollars on the side has literally remained unchanged for going on 35 years now.   A lot of people think something is awry with this picture.  So let us take a quick look at the history behind all of this…

So what does the realtor community all across the state of California do, after putting up with supposed armies of rich elderly homeowners and their grown children, renting out inherited luxury homes on the beach for decades – along with having the nerve to actually reside in their own home for decades, simply to take advantage of Proposition 13 or Prop 58, so they can avoid property tax reassessment and rent out luxury homes to upscale tourists?

Apparently also further enraging the realtor community AND the Legislature by also taking advantage of a certain Proposition 58 transfer of property – these wealthy homeowners also take terrible advantage of the California tax system by using these Prop 58 tax breaks to buyout property shares inherited by co-beneficiaries as a transfer of property between siblings – combined with the transfer of parents’ property taxes when they are in fact inheriting property taxes from a parent.

Actually “having the gall” as many critics of property tax relief would put it in the Los Angeles Times or San Fran Chronicle, to basically save a small fortune on a property tax transfer, by exercising their right to keep parents property taxes rather than pay full freight with full up-to-date market rates – paying “their fair share” without “taking advantage” of Proposition 58’s Parent to Child Transfer, or Parent to Child Exclusion.

Apparently, the Legislature and the realtor community are so hard-up for cash that all the property owners in California should be expected to pay reassessed property tax rates, adding thousands, often tens of thousands to ones’ tax bill… and not take advantage of Proposition 13 & 58. Eventually, the Legislature and their friends at the California Association of Realtors  decided something had to be done about this perpetual injustice!

So the California Association of Realtors and other supporters of  a tax measure they called Proposition 19, in 2020, raised $63.8 million ($58.6 million from CAR) and $4.9 million from the National Association of Realtors.  Opponents raised less than $50,000 to wage a political-social campaign, and finally these critics of property tax breaks took down the dreaded Parent to Child Transfer tax break – protected by the triple-dreaded Proposition 58 tax measure since 1986. They weren’t actually able to completely remove this tax break… However, they came awfully close.

Yet as residential or commercial property owners found out, after all the hysteria died down across the state, and property owners finally realize that they had in fact been bamboozled into voting for this tax measure that was turned out after all to be a hungry tax wolf disguised as a charming sheep who just wanted to help seniors and school children. BUT – they still had plenty of property tax relief options left… they were just a bit more challenging to access. Yet that really would be a political third rail. Especially after voters in California finally saw they had been deceived. 

Therefore, despite all the worrying about this, all these property tax relief options remain intact. If we inherit parents’ property from a trust or an estate we can still take advantage of Proposition 13 & 58 to access a large 6 or 7-figure loan to an irrevocable trust to buyout co-beneficiaries so we can own it solo, and keep parents low tax base… frequently without a credit report, without up-front charges, with low interest, no hidden fees, usually in just a few days, and always with very simple terms – unlike your typical bank or credit union.

As long as we have a Prop 58 friendly trust lender, for example like the Commercial Loan Corp. who can reached at 877-464-1066 so you don’t have to hunt for the number… Plus there are a few Websites besides this blog that explore the often misunderstood process of  taking full advantages of Proposition 58 Parent to Child Transfer, or Prop 193 Grandparent to Grandchild Exemption carefully covering Transfers Between Parent and Child or  Grandparent and Grandchild.

And of course there is the often used research Website, with up to date news and  information on Proposition 13 at the Howard Jarvis Taxpayers Association  or for a formal cutting edge look at updated information exclusively vetted and imparted for California property owners, regarding property tax relief for those impacted by Covid-19, at Andersen.com… Moreover, to take advantage of Proposition 13 & 58 whenever and wherever possible!  There is no point in ignoring any property tax assistance you can receive, one way or the other!