Are Trusts Mainly for Wealthy Folks?

Are Trusts Only for the Wealthy

Are Trusts Only for the Wealthy?

Gifting property to adult children is a great thing to do, no matter the tax breaks – and thankfully, if you live in California and inherit property in that state, you do not need to be mega wealthy with $1,200 per hour tax lawyers to be able to avoid property tax reassessment, or to learn how to use a trust to save on taxes or to buy out siblings’ shares in your inherited real estate… with a trust loan.

Putting it bluntly, it doesn’t hurt to live in a state like California, where you get to save tens of thousands in tax breaks every year, compared to other states…. or compared to California the way it was pre-1978 before Proposition 13, and later in 1986 with Proposition 58, when you started to be able to keep parents property taxes when you’ve inherited property and are able to transfer parents property taxes, inheriting property taxes on a property tax transfer with a simple parent to child transfer or as lawyers call it, parent to child exclusion. Or perhaps lucky to be anywhere, if you can keep that house you inherited in your name, and you have a very good accountant! Another point – why trusts aren’t just for wealthy folks to save on income tax. 

There are trust lenders providing trust loans in California to cure family estate problems, with some beneficiaries insisting on selling inherited property – and no one can agree what the property value is, whether the local tax assessor is right or wrong;  or whether to sell or not to sell.  This is most likely one reason, besides saving on property taxes, that many property tax consultants and tax attorneys firmly believe that lawmakers in every state should pass property tax relief bills that make sense.

It would be advisable for homeowners and beneficiaries inheriting property to go to websites focused on CA Proposition 19, Prop 13, Prop 58, and Proposition 60… such as Michael Wyatt Consulting   and Trust and Estate Loans info-sites  or irrevocable trust lenders, or perhaps niche California focused property tax relief blogs like this one, Property Tax News.  Which is simply to straighten up and learn more about why property tax relief is crucial to California, and would be an economic life-saver to other states, if they were to surprise everyone and gain some genuine leadership, along the lines of what New York has.  So the middle class (not just the millionaires) can live in comfort and security.

As every state in America is now in the throes of a relentless pandemic, with a disastrous affect on businesses and unemployment within local and state economies…  lawmakers in every state would be wise to look at passing a property tax relief bill that would give consumers some financial relief, for example as CA Proposition 13 did in beginning in 1978 and Proposition 58 did in the beginning of that Amendment in 1986, giving Californians the ability to transfer parents property taxes.   

It seemed like a miracle for middle class homeowners in California… and beneficiaries to trusts inheriting a home from parents.  Enabling a property tax transfer solution from parents and grandparents when inheriting a home, and likewise inheriting property taxes – with a parent to child transfer or parent to child exclusion… the urgent need to keep parents property taxes was all of a sudden a reality, thanks to Howard Jarvis and colleagues, regardless of their deeper motivations – and of course the ability to transfer parents property taxes when inheriting property; avoiding property tax reassessment to keep property taxes low, and to have the ability to utilize trusts for a lower tax base – for all Americans; not just for corporate CEOs, VIPs and wealthy families in Beverly Hills, in Santa Barbara, the Marina in San Francisco, or similar locales. 

Does the 1978 Proposition 13 & 1986 Prop 58 still Work for Californians?

Does the 1978 Proposition 13 and 1986 Prop 58 still Work for Californians

Does the 1978 Proposition 13 and 1986 Prop 58 still Work for Californians

History Lesson on Property Tax Relief: Support & Opposition

2020 was an extremely motivated time for pent up anti property tax relief movement in California.  The deceptively entitled “2020 Proposition 13” went to voters on March 3, 2020. This tax hike would have increased California’s overall debt; compelling the state’s school districts to issue more debt, raising property tax bills all across the state. It did not pass, and to put it bluntly, was an utter waste of time and taxpayer’s money.

Unlike Proposition 13 passed by voters in 1978, this 2020 version of Proposition 13 would have doubled the debt caps that currently limit how much bond debt local school districts can acquire. The 2020 Proposition 13 caps on local bond debt would have been increased from 1.25% of assessed property value to 2% for elementary and high school districts, and from 2.5% to 4% for school and community college districts.

The extra property tax revenue from 2020 Prop 13 would have gone into pockets not into roads.  The  2020 Proposition 13 tax hike would have cost taxpayers $740 million per year for 35 years. The cash mainly going to construction-worker unions and contractors that hire everyone, with priority spending going to people working on projects in districts that have signed labor agreements that those in  power prefer.  As we know, the so-called 2020 Proposition 13 failed.

Prop 15 and the Near End of Commercial Property Tax Relief     

Even more dangerous for California, the 2020 Proposition 15 tax hike that was proposed to voters across all 58 counties would have removed the right for commercial property owners to avoid property tax reassessment.  This would have raised property taxes on all commercial and business property owners, which would have raised commercial store rents, office and apt. rentals, rentals on all business tenants would have gone up.  This would in turn have increased prices on all goods and services throughout the state of California.   Considering the outcome on middle class residents and working families, it would not have been a pretty picture.

Supporters of the Proposition 15 campaign raised over $67.6 million mostly from foundations and public service unions. The top three contributors were the Chan Zuckerburg Initiative, California Teachers Association, and SEIU California. Supporters say Prop 15 is a broad coalition of 1600 organizations launched by civil rights organizations, housing groups, parents, teachers, nurses, firefighters and community-based organizations who advocate for equality and justice for communities of color

Opposition to Proposition 15 Campaign has raised over $73.1 million mostly from land developers, agricultural interests and golf and country clubs. The largest donor is the California Business Roundtable Issues PAC that has contributed more than $38 million to the No on 15 Campaign.  The Business Roundtable’s biggest donors are New York-based Blackstone Property Partners who gave $7 million and Michael Hayde, CEO of the Irvine real estate investment firm Western National Group, who gave $4.5 million.

Despite the massive effort towards promoting and passing this tax hike, voters were not sufficiently confused or conned into backing the bill en mass… and they rejected this tax increase on commercial properties, supposedly depriving the California school system of what allegedly could be a significant source of consistent revenue.  Although the true intended recipients of this extra commercial property tax revenue remained under questions… and backers of Proposition 15 – the first major effort to cut into beloved property tax relief afforded by Proposition 13 since it was voted into law in 1978 – finally conceded defeat, and California heaved a statewide sigh of unified relief. 

The question remains – would economic collapse of the statewide   consumer base and working family structure in California have been worth a few extra dollars for the educational system, which is doing relatively well as is?

Last Minute Promotion of Snake Oil Sales to California Voters

Motivated, determined and relentless opponents to property tax relief in California came up with a last minute tax hike measure, Proposition 19 – and the CA Association of Realtors shoved $35 Million at the CA Legislature to promote this unusually deceptive bill, after suffering significant tax hike losses.  They managed to confuse enough voters with disingenuous and deceptive public relations to get Proposition 19 passed – by a hair – and watered down the critical Proposition 58 “parent-to-child exclusion” tax break for middle class beneficiaries and new homeowners. 

This weakened California homeowners’ ability to avoid property tax reassessment without obstacles. So Proposition 19 managed to limit parent to child transfer rights to a one-year window, and only as a primary residence.  No longer could investment properties avoid property tax reassessment.

So the ability to transfer parents property taxes, when inheriting property taxes from a parent, is now on a tighter path. We can still keep parents property taxes but they made it more challenging, in the midst of a Pandemic no less.  Avoiding property tax reassessment and establishing a low property tax base; as well as buying out a sibling’s share of inherited property, meaning the transfer of property between siblings or sibling-to-sibling property transfer – still exists, yet with a few more obstacles to remain aware of. 

We can still transfer parents property taxes in California when  inheriting property and inheriting property taxes from a parent, and remain able to keep parents property taxes on any property tax transfer, such as the parent to child transfer or parent to child exclusion.  It’s just not quite as simple or easy as it was prior to advent of Proposition 19.

Thankfully, enough property tax breaks survived in California to enable property owners to still save significantly on property taxes. Californians can still get a trust loan from a trust lender, working alongside Proposition 58, to buyout a co-beneficiary when inheriting property taxes from a parent – and, most importantly, to establish a low Proposition 13 level property tax base, basically forever for an inherited home, for example from a niche firm like Commercial Loan Corp.  

Most Californians struggling financially from Pandemic shutdowns and health outcomes should research niche blogs like this one, or   info sites like EdSource.org who looks  at both sides of Proposition 15 for example, or SiliconValleyandBeyond.com who examines property taxes and Proposition 19, among other related issues. As well as state government websites such as the  California State Board of Equalization.  The more we know about how to use trust loans and these unique tax breaks, plus other property tax reduction solutions we have access to, the better off we’ll all be going forward.

Transferring Your Mom’s Low Property Tax Base Via Prop 19

Transferring A Parents Low Property Tax Base with California Prop 19

Transferring A Parents Low Property Tax Base with California Proposition 19

It’s certainly nice and politically correct of the California Governor to let resident companies and families pay property taxes a few weeks late;   with millions of people unemployed or under-employed — with mouths to feed and bills to pay.  Politically correct, with nice optics… But not terribly effective, let’s face it.

How about just not collecting property taxes as long as the pandemic is literally killing our economy. How about something with a material, profound affect, not just nibbling weakly around the edges.  However, California still has more property tax relief options than any other state in the union, for middle class homeowners.  Wealthy residents  have countless tax cuts and property tax breaks.

At any rate, the country is moving rapidly towards a vaccine. Fine. But if the Governor of California and his team really want to move the needle for middle class residents, and genuinely help working families survive the disastrous pandemic economic effect — why don’t they update and bolster the benefits offered by Proposition 19, which is already in place?  No need to re-invent anything to move this to the next level! 

As the pandemic continues to diminish the California economy — the powerful realtor community and the State Legislature are promoting status quo — not really digging in and trying hard to  upgrade and improve the property tax breaks that are already in place.  They seem to have no appetite at all to make  the lives of millions of middle class homeowners more secure — with hope for better days in the future.  They seem instead to be far more interested in making the realtor community and the Legislature more secure, more comfortable, and a great deal wealthier regardless of the fact that these partisan groups are already swimming in money! 

However, despite the Legislature’s indifference to the financial problems of the middle class, Californians still have property tax relief options such as the right to keep parents property taxes, and transfer parents property taxes upon inheriting property and inheriting property taxes at a low base rate, as per Proposition 58 which is really now Proposition 19… Plus of course Prop 13 — but the walls may close in on us fast if we allow the powers that be to return with anything like the infamous commercial property tax Proposition 15; which would have increased prices across the state on virtually all goods and services… cutting deep into the middle class spending and tax paying machine that basically keeps the state economy alive. 

Many of these middle class residents stay up to date on  their property tax options, with websites such as the official California State Board of Equalization site.  As well as by researching inheritance solutions and property tax relief on property tax blogs like this one, Property Tax News;  plus going to websites addressing Prop 13 and maintaining a low property tax base… basic property tax breaks that allow resident to spend less and save more, like Trust and Estate Loans, and crucial updated information and news on Proposition 19 at the Howard Jarvis Taxpayers Association.  

Residents  these days also look seriously at options  and solutions to property devalued by the affects of the pandemic… going to websites like Michael Wyatt Consulting for help.  In fact, Mr. Wyatt speaks to this on his website in a very direct way.  He says:

The Covid-19 / Coronavirus pandemic has severely impacted the commercial and investment real estate markets in California. This has placed a significant burden on many property owners. The good news is, property tax relief is now available.  One of the property tax relief measures available is for when “restricted access” to properties causes a loss of market value of those properties. The other is reductions in value due to damage, destruction, depreciation, obsolescence, removal of property, or “other factors causing a decline in value“.  An effective method of supporting lost value due to restricted access or damage to a property, is to measure the loss of  revenue  from periods before and after the event causing the decline of the property’s performance.

New homeowners in California also research property tax breaks at  established finance firms that are focused on options that involve Proposition 58, and now Proposition 19, maintaining a low property tax base through a loan to an irrevocable trust, such as critical financing options for California residents furnished by Commercial Loan Corp — again, working hand-in-hand with Proposition 58 having morphed into Proposition 19 for all intensive purposes.   For  all commercial and residential property owners; enabling beneficiaries and homeowners to lock in a secure, low Proposition 13 property tax base, while buying out co-beneficiaries that have inherited the same property, yet are committed to selling their property shares — and who ultimately walk away with far more money in their pocket from irrevocable trust funding, rather than simply accepting cash from a third party buyer!

Property tax options that involve going through a trust loan are important to tax attorneys and sophisticated beneficiaries, as these specific property tax options are always more profitable; as well as maintaining a low property tax base with a property tax transfer, basically for the life of the property, with a standard parent to child transfer, or parent to child exclusion from paying reassessed property taxes; as long as requirements for Proposition 58 — now Proposition 19 — have been met.

We so have effective options to turn to in California… So we shouldn’t complain too much even though new property tax relief changes have created some challenges.  We also have a lot to be thankful for.

If you are curious how much you might be able to save by taking advantage of California Proposition 19 or Proposition 58, fill out the short form located here for a free estimate. 

Part Two: Proposition 19 Forces Changes to Prop 58 While Proposition 13 Remains Intact

A certain Proposition 15 was promoted with millions of dollars behind it, yet it didn’t pass. However, the fact that the California Legislature was in favor of it is still troubling to many California homeowners. 

Proposition 15 would have removed commercial properties like office buildings and industrial parks from Proposition 13 protections, mainly the ability to avoid property tax reassessment from current tax rates… Inheriting business properties from a parent would, under Prop 15, no longer have provided  business property heirs with Proposition 13 tax breaks – so heirs can avoid property tax reassessment for inherited commercial properties. 

Inheriting property taxes at a low Proposition 13 base would no longer apply to beneficiaries inheriting commercial property.  Beneficiaries inheriting office buildings and other business facilities would no longer have been able to transfer parents property taxes.

It would have raised the rents on apt. buildings and office buildings, on all commercial tenants, affecting stores and malls, supermarkets, car dealers, pharmacies and you name it. Effectively raising the prices of all goods and services in California. An economic disaster in the making. Fortunately, it did not pass.

As a well known realtor in Santa Barbara pointed out recently in an interview, Estate-planning attorneys are going to be very busy now, as Proposition 19 may cause many family members to decide to sell property they had intended to pass on to their heirs. Although other siblings will decide to keep and move into a home inherited from parents – as a primary residence – so heirs can avoid property tax reassessment  It’s a game-changer….

In terms of properties being sold that would have been passed on through a family trust, or to beneficiaries who simply cannot afford to pay property taxes that are reassessed are current rates… or folks that just object to paying higher property taxes on principle. Realtors are going to make a lot of money like this. And that’s good for them and possibly good for California. The problem is, a lot of those folks selling their home in response to high income tax exacerbated by    inflated living expenses, are also moving out of the state permanently – if they are also unable to save thousands of dollars every year for emergencies or their retirement account – by avoiding property tax reassessment.  And that’s not good for California!”    

Higher property taxes or not, California will always be an attractive place to live, to start a family, or just because the weather and the sights are pleasant.  People are always going to want to live in California, but long-term residents see life getting more expensive in that state – more rapidly than anyone anticipated.

Moreover, the prospect of getting more and more squeezed by taxes is forcing both large and mid-sized companies, as well as a surprising number of people approaching retirement, soon to be on a fixed income, to move to other states that are far more income-tax, corporate-tax and property tax friendly – and the companies take their jobs with them!

A good number of residents in their 20s (just out of college) are choosing to leave the state, with no intention to return.  In contrast to recent years, when California was an extremely popular state for young homeowners… and people in their 30s and even 40s, looking to start a family. Now, many young adults and families are seeking the most affordable place to live following college, or just as their careers are taking off – frequently with very young children to think about.

And this is where the CA Legislature’s short-sightedness really becomes obvious… Point being,  what else leaves the state with all those young residents and tax conscious companies? The large amount of taxes they pay to California every year!

Part One: Proposition 19 Forces Changes to Prop 58 While Proposition 13 Remains Intact

California Proposition 19

California Proposition 19

What does the passage of Proposition 19 mean for the general housing market in California, one of the nation’s most expensive states to live in?  Although the state will run into an increase in revenue due to a property tax hike, some residents who reside in inherited properties might discover that living in California is becoming more and more difficult  and unaffordable.

Nick Solis, a well known real estate professional, and president of One80 Reality said recently in an interview, “California is a state where blue collar working class folks generally pass down their home to their children or other family members.”

Of course this is where trust lenders, for example like Commercial Loan Corp, are going to get busier, helping beneficiaries to get approved for Proposition 58 and California Proposition 19.  Naturally, Prop 58, Prop 19 & a trust loan lets us buyout siblings, or co-beneficiaries.  Trust lenders are going to become more popular as this type of transaction becomes even more in demand than it already is now.  Siblings who are looking to sell out, and often leave the state, will actually walk off with more money from a trust loan than they would if they sold out to a third party that is not a family member.

Mr. Solis explained, “Not everyone who inherits a home form their parents is wealthy.  Many blue collar workers and working class families bought property in previous decades when homes were affordable, and are passing them down to their kids…”

It took a quasi civil war to get property taxes to this point. The overzealous, fanatical opponents of property tax relief in California never gave up, despite 42 years of trying and failing to remove property tax relief from the California tax system. They gritted their teeth and attempted to push through proposition after tax measure after tax bill to accomplish that. For 42 years, Proposition 13, which successfully limited property tax increases, helping beneficiaries, homeowners and commercial property owners avoid property tax reassessment. Hence, Prop 13 remained untouchable. A political third rail.

Proposition 13 weathered and rebuffed numerous legislative and legal attacks… Even including one at the Supreme Court.  And nothing stuck. Prop 13, and subsequently the 1986 Amendment, Prop 58 & a trust loan lets us buyout siblings, with it’s sacrosanct Parent–to-Child Exclusion (or Parent-to-Child Exemption), this all seemed to be more or less indestructible. 

As far as Proposition 19  is concerned, the forces behind it steered clear of  disabling the right to transfer parents property taxes or inheriting property taxes from parents with the ability to keep parents property taxes. Beneficiaries still had confidence in the fact that Prop 58 & a trust loan lets us buyout siblings and lock in a low Proposition 13 tax base.  Property tax transfer, parent to child transfer, parent to child exclusion and  the transfer of property between siblings all remained safe…     

>> Click Here to Continue to Part Two…