Assembly Member Kiley Introduces Constitutional Amendment 9 to Block CA Property Tax Hikes

Reinstate Propositions 58 Property Tax Transfer In California

Will California Reinstate Propositions 58 Property Tax Transfer Laws?

Assembly Constitutional Amendment 9 (ACA 9) has been introduced by Assemblyman Kevin Kiley, of Granite Bay, CA – to formally reinstate Propositions 58 and 193, and return the parent-child exclusion to full unlimited measure; without imposed limits, to the CA state constitution – restoring the ability of parents and grandparents to pass on property to the next generation without any deceptive obstacles and/or property tax increases.

The CA Legislature Assembly Constitutional Amendment 9 was  introduced by Assembly Member Kiley on May 03, 2021, regarding property taxation & the transfer of an inherited home to a principal residence, for beneficiaries. 

ACA 9 is written into the official California record, as follows:

The California Constitution limits the amount of ad valorem taxes on real property to 1% of the full cash value of that property, defined as the county assessor’s valuation of real property as shown on the 1975–76 tax bill and, thereafter, the appraised value of the real property when purchased, newly constructed, or a change in ownership occurs after the 1975 assessment, subject to an annual inflation adjustment not to exceed 2%…

The California Constitution, until February 15, 2021, excluded from classification as a “purchase” or “change in ownership” requiring reappraisal the purchase or transfer of a principal residence and the first $1,000,000 of other real property of a transferor in the case of a transfer between parents and their children, or between grandparents and their grandchildren if all the parents of those grandchildren are deceased.

On November 3, 2020, the voters approved Proposition 19. Pursuant to Proposition 19, the California Constitution, on and after February 16, 2021, removes the above-described exclusion from classification as a “purchase” and “change in ownership” requiring reappraisal, and instead excludes from classification as a “purchase” and “change in ownership” the purchase or transfer of a family home or family farm, as those terms are defined, of the transferor in the case of a transfer between parents and their children, or between grandparents and their grandchildren if all the parents of those grandchildren are deceased, if the property continues as the family home or family farm of the transferee. In the case of the exclusion so provided to a transfer of a family home, the California Constitution, pursuant to Proposition 19, requires the transferee to claim the homeowner’s or disabled veteran’s exemption within one year of the transfer.

This measure would repeal the above-described provisions of Proposition 19. The measure would reinstate the prior rule excluding from classification as a “purchase” or “change in ownership” requiring reappraisal the purchase or transfer of the principal residence and the first $1,000,000 of other real property of a transferor in the case of a transfer between parents and their children, or between grandparents and their grandchildren if all the parents of those grandchildren are deceased. The measure would apply retroactively to all effected purchases or transfers occurring on or after February 16, 2021.

Prior to 1978 with the advent of Proposition 13 becoming law, capping property tax reassessment at 2% for owned property in California, residents found themselves paying arbitrary property tax hikes more and more often, with elderly homeowners, living on a modest fixed income, being evicted when they couldn’t pay egregious tax hikes, which started to become a frequent event; and began to alienate and anger the middle class public, to an extreme degree.  It wouldn’t be an over-statement to say this widespread displeasure opened up the doors wide for a tax break like the parent-child exclusion!  Property tax breaks that enabled the middle class all across California, when inheriting property from parents, to feel justified, just like the wealthy, to be keeping a low property tax base when inheriting a home.

Middle class residents in Californians, and working families, were frustrated that rapidly rising property values had turned property taxes into what was effectively a “death tax”.  It was this overall response from the public throughout the state that left events wide open, in terms of following and supporting Howard Jarvis and his Taxpayers Association – adopting the property tax relief measure they called Proposition 13.

Under Proposition 13, which passed in a landslide in 1978, property tax assessments could no longer increase more than 2% per year until, or unless a new owner took over the property, which triggered a reassessment at current market rates. Middle class offspring inheriting their parents’ home usually figured out right away that they were going to have a real problem paying reassessed property taxes, as that tax bill was typically more than most middle class families could afford to pay every year. 

So in 1978 Californians happily accepted the ability to keep parents’ property taxes, transfer parents property taxes, and inheriting property taxes instead of paying egregious tax hikes.  The right to finally have access to  a property tax transfer from a parent, a parent-child transfer, or parent-child exclusion, was huge for California property owners… in fact, even for renters.  And certainly for residential and business, or commercial, property owners.

Then, having tasted some of “the good life”, in terms of saving on taxes,  formerly enjoyed only by the nouveau riche and old money, Californians, in 1986, voted in high numbers and passed a  measure called Proposition 58 with the approval of more than 75% of California voters.  This amended the California constitution, to state that the transfer of real estate between a parent and a child, generally property transferred from parent to an heir, would not be considered a “change of ownership” and would fall under a new property tax reassessment exclusion, something they called “a parent-child exclusion”; capping their property tax bill at the same rate their parents paid.

A decade later, voters approved Proposition 193 to apply the same exclusion as the parent-child exclusion, except it covered property transfers between grandparents and grandchildren – as long as the children’s parents were deceased.  California Proposition 193 grants the same rights to a grandchild as Proposition 58 grants to a child.

Under Proposition 58 and Proposition 193, working families could transfer a home of any value plus up to $1,000,000 of assessed value of additional real estate. This protected families that owned a small business, or a condo or duplex that was rented out for income, or a vacation property.  Therefore the death of a parent would not trigger a sudden reassessment of these properties at current high market rates, increasing yearly property taxes to such a degree that middle class beneficiaries would be forced to sell their inherited property shares right away.

Jon Coupal, president of the Howard Jarvis Taxpayers’ Association, summed up this proposed tax measure in the Daily Breeze on May 9, 2021 in clear fashion, when he said:

…a slick advertising campaign for Proposition 19 tricked voters into repealing Propositions 58 and 193 without realizing the impact it would have on their own families. Prop. 19 replaced the parent-child transfer exclusion from reassessment, which has been in the state constitution for 35 years, with a narrow exclusion that only applies to homes that the heirs move into within a year and make their permanent principal residence.

These harsh provisions took effect with lightning speed in February, at a time when families were prevented by the pandemic from meeting with other family members, attorneys or tax advisers. Many people are just now finding out what happened. Letters are going out from county assessors to grieving families advising them of their new tax obligations.

This must be fixed. And it can be if Californians make their wishes known to elected representatives. ACA 9 would preserve family businesses, affordable rental properties, and home-ownership for families that otherwise would lose the benefit of the hard work their parents put in to secure their futures.

We couldn’t have said it any better ourselves.

Unexpected Limitations Imposed on the CA Parent-to-Child Exclusion From Current Property Tax Rates

The California Parent-to-Child Exclusion for Property Tax reassessment

Keep a parents property tax rate on a home you inherit.

Parent-to-Child Transfer to Avoid Property Tax Reassessment

The ability to avoid property tax reassessment in California through Proposition 13 and Proposition 58 or Proposition 19 is not available only to families that own shopping centers, office buildings or apartments – it’s there for every middle class beneficiary and working family inheriting property from parents – to take full advantage of.  Despite limitations now imposed on some of these property tax relief measures, as of 2021.  It is still there to utilize, and unlike most tax loopholes and tax breaks, it’s not just for the wealthy.

Californians have relied on the Prop 58 parent-to-child transfer and Proposition 193 (grandparent-grandchild exclusion) to transfer California real property to children and grandchildren without property tax reassessment.  Until February 16, 2021, parents could transfer ownership of a principal residence of any value and up to $1 million of assessed value (per parent) of non-principal residence property (vacation and rental homes, commercial property, etc.) to one or more children or one or more irrevocable trusts exclusively for one or more children without property tax reassessment.

Admittedly, Proposition 19 changed those rules. Starting February 16, 2021, the ability for a parent to transfer to heirs up to $1,000,000 in assessed value of a home or real property of any kind that is NOT being used as a primary residence – is no longer possible in most cases.

Previous ability for a beneficiary or heir to avoid property tax reassessment of inherited property that is not being used as a primary residence by the parent, i.e., the decedent, or by the beneficiary or heir inheriting the property – no longer exists; unless things change.  In other words – inherited real estate being used as investment property, and rented out to vacationers, is no longer possible.

However, the process of inheriting property while keeping a low property tax base with the use of a trust loan from a trust lender, while buying out a sibling’s inherited property shares is still very much alive and well in California.  You simple  need to know how to take advantage of the system properly.

So to reiterate, the transfer of a non-primary residence now must be reassessed at what attorneys call “fair market value”, simply meaning current high property tax rates… Except when beneficiaries are using the residence as a primary or principal residence; and the current property tax rate of the residence at the time of transfer does not exceed the parent or decedent’s so-called “assessed value” by more than $1,000,000.  

Assembly Constitutional Amendment 9: Efforts to Reinstate Prop 19

If the inherited residence exceeds the assessed value by more than $1,000,000 the inherited property’s assessed value will be assessed at current market rates – minus $1,000,000.  And these changes are what Jon Coupal at the Howard Jarvis Taxpayer’s Association and political friends of theirs are trying to walk back or permanently stall with their Assembly Constitutional Amendment 9 (i.e., ACA 9), introduced by the young CA Assemblyman, Mr. Kevin Kiley.

 

 

Inheriting Property While Keeping a Low Property Tax Base

Keeping a Parents Low Property Tax Base

How tp Keep a Parents Low Property Tax Base on an Inherited Home

2020–2021 Slowest Growth Rate in California’s History, While Real Estate Values Soar

As average sale prices of single-family homes in California approaches $800,000 the state’s population fell by more than 182,000 people, to less than 39.5 million people in 2020; signaling the first year America’s most populated state experienced such a slow growth rate, abc7.com tells us. As experts and analysts continue to debate the reasons why… 

Economic Conditions in California Call for Property Tax Relief, Not Tax Hikes

In May, 2021 Adam Beam from ABCnews.go.com & Associated Press told us, “In recent years, more people have left California for other states than have moved there, a trend Republicans say is a result of the state’s high taxes and over-prices real estate. The average sale price of a single-family home in California hit a record $758,990 in March, a 23.9% increase from a year ago.” (2)

Ben Christopher at CalMatters.com declared on May 7, 2021 that “The number of Californians declined in 2020 for the first year since at least 1900. The COVID-19 pandemic has done what more than a century of past plagues, recessions, crime waves, droughts and earthquakes couldn’t. It shrank California’s population.” 

“The numbers don’t lie. People are leaving our state because it’s not affordable to live here…” tweeted Mr. Kevin Faulconer, former mayor of San Diego. Without knowing it, they are all correct. 

Property Tax Specialists in California Are Trying to Make a Difference – to Help Residents

To help middle class families that have been impacted by these problems, several financial services companies have been focusing on lowering property taxes for new homeowners and beneficiaries of trusts and estates – such as Michael Wyatt Consulting in Corona and the leaders of the trust lending industry, Commercial Loan Corporation in Newport Beach, who is offering a free consultation to residents on transferring parents property taxes to keep a low property tax base on an inherited home.

Trust lenders help families get approved to work with tax measure Proposition 58 and 19. They originate loans to estates and irrevocable trusts; allowing beneficiaries who are inheriting real estate and liquid assets to buyout inherited real property from co-beneficiaries; equalizing distribution of funds to beneficiaries who are selling.

Working With CA Proposition 58

CA Proposition 58 was approved by voters on Nov. 6, 1986, as a constitutional amendment; excluding from reassessment transfers of real property between parents and their children, typically  transferring parents property taxes – providing a loan directly to a trust, thereby avoiding any risk of triggering property tax reassessment. Loan proceeds are then used to pay off beneficiaries who are selling their real estate assets in line with a parent-child transfer, or “parent-child exclusion”.

Oddly enough, funding through a trust helps co-beneficiaries receive more cash than they are likely to receive from a buyer directly. The title of the property can then be transferred from the name of the trust into the name of the beneficiary who is retaining inherited property.

Utilizing Prop 58, Prop 19 & Trust Loans to Resolve Cash Flow and Family Property Conflicts

Property tax relief oriented firms in California are now working more closely with families inheriting property, alongside their attorney, or family accountant – assisting co-beneficiaries to avoid property tax reassessment at current market rates.  Beside sibling to sibling property transfer, families these days need to get as familiar as possible with their right to be transferring parents property taxes when inheriting a home and while subsequently inheriting property taxes.  Middle class families’ ability to keep parents property taxes and the property tax transfer process in general should be second nature to all middle class families. 

Frankly, all working families and beneficiaries in California should take full advantage of a free consultation from a trust lender like Commercial Loan Corp, in terms of transferring parents property taxes to save money on property taxes; plus resolving sibling conflicts over keeping or selling inherited property, with respect to how much a family can expect to save on property taxes, this year and every year thereafter!  Families can look at saving $6,000 and up every year in property taxes.

A loan to an irrevocable trust allows beneficiaries to keep an inherited home with their parent’s low Prop 13 tax base, while beneficiaries who prefer to sell receive an equal portion of cash, in fact a good deal more than an outside buyer would typically offer.

It’s also important to note that a good trust lender will help beneficiaries learn exactly how to take advantage of Proposition 19 or Proposition 58 to avoid property tax reassessment.  And by avoiding expensive realtor fees, beneficiaries on average receive an additional $15,000; and those keeping inherited property save an average of $6,200 per year in property taxes. 

CA Property Tax Specialists Clarify Their Process

Tanis Alonso, account manager at Commercial Loan Corp, discussed trust loan solutions in a 2021 interview with this blog – with respect to selling an inherited home versus keeping it. She told us:

We don’t view each trust loan as simply a ‘financial transaction.’ Nor do we see the home they’ve lived in for decades as just a ‘piece of real estate’. 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 we’re assisting, financially and emotionally, not just as clients signing a contract for a trust loan. We enjoy helping people… getting them money when they really need it – saving them on the cost side in the bargain, with a trust loan.

Ms. Alonso also elaborates on the firm’s process: Besides lowering property taxes the key issue for families is selling as opposed to keeping inherited property. By someone keeping the family property, everyone receives more money than if they were to sell the property to an outside buyer. Because with a loan to a trust there is the upside of less expense. We’re talking about much less 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 ten times the amount to process the entire scenario, a house sale, with realtor commission and fees, taxes, ancillary costs, etc…

Trust Lenders and the CA Parent-Child Exclusion 

Property tax consultant Michael Wyatt formed Michael Wyatt Consulting 25 years ago to help advisors and their clients avoid inadvertent tax consequences, to achieve success and achieve their goals. Mr. Wyatt told us in a recent interview:

By and large, trust lender terms can be a lot more flexible than an institutional lender like Wells Fargo or Bank of America if they are self funded, which few are. They can extend easier terms to clients. Commercial Loan Corp is one of the few self-funded trust lenders with parent-child exclusion expertise, which is why I deal only with them, when my clients need a large loan to buyout property form siblings, and establish a low property tax base going forward.

Compliance for commercial and residential property owners is far less strict with them, due to their being self funded. They don’t charge any fees up-front, another great benefit. Plus, they don’t require paying loan interest in advance. Most trust lenders do.

There is never a “due-on-sale” clause… that requires the mortgage to be repaid in full when sold; or that all or some of the interest owed must be paid up-front to secure the mortgage. No “alienation clause” during property transfer, stating that the borrower has to pay back the mortgage in full before transferring property to another person. It’s fast, 5 to 7 days; and all costs are offset. It makes more sense for new homeowners, and beneficiaries, to take this trust loan approach … when inheriting property from parents.” 

We couldn’t have expressed it more clearly ourselves!

If you need assistance with a trust loan or questioned answered regarding if you might be able to keep a parents low property tax base on an inherited home, we recommend you contact either Michael Wyatt at (951) 264-6152 or Commercial Loan Corporation at 877-756-4454.

What CA Beneficiaries, Trustees & Homeowners Need to Know

New California Prop 19 Property Tax Transfer

New California Prop 19 Property Tax Transfer

Tax Basis Portability

As of Feb. 2021, so-called “tax basis portability” has been available to beneficiaries and homeowners, under the new Proposition 58 quasi-replacement, CA Proposition 19.  Tax basis portability is a way to reduce the assessed value of your home.  As a result, you have the generally significant benefit of lower property tax liability.

With “tax basis portability”, you can transfer the old assessed value of your previous home, to your next home. For instance, if you own  a house with an assessed value of, say, $400,000. You sell it for $600,000, and purchase a house for, let’s say, $550,000.  So rather than a new reassessed value of $550,000, you can apply to reverse  the value of the property back to the previous assessed value of $400,000. Therefore, the lower value can shave roughly $1,800 off your property taxes every year.  OK, it’s not a million dollars, but it adds up…

As long as you can verify that you are –

  1. age 55 or older;
  2. or severely disabled;
  3. or own a home that has been significantly damaged by forest-fire or wildfire, or a natural disaster, such as a flood.or severely disabled;
  4. plus, are inheriting a home that was a principle residence; and are moving into the property only as a principle residence.

“Portability” is language used to define estate tax law that enables a surviving spouse to use an estate tax exemption left by a deceased spouse to protect valuable assets during the surviving spouse’s life, or at the surviving spouse’s death.

Potential Issues with a Replacement Property

A “replacement property” can be purchased prior to the sale of home you are currently living in. Of course there may be some problems property tax relief critics, realtors, politicians, and the Legislature doesn’t like to acknowledge – such as the size of an inherited home, your family may be way too large for it.  Or the inherited home may be in an undesirable area. 

If you have children in school, the school in the new school district you may find yourself in might be completely  inferior to the previous school, upsetting your children. Or your commute to work may end up being an extra 4 hours on the freeway, getting to and from your new inherited home!

These issues can be exhausting and debilitating in the long run. Certainly something to consider.  In a perfect world, these issues would not surface and become a big problem when you inherit a home from a parent. However, it’s generally not a perfect world.

Improvements to Propositions 60, Prop 90 & 110

Revisiting several of the new property tax relief options… One can safely say, despite components that are perhaps not so helpful – that Proposition 19 is, in some ways, less restrictive than the old Proposition 60, Prop 90, and Prop 110.  There are no more county or sales price restrictions, and people can use the Proposition 19 property tax benefit more than once in a lifetime.

Proposition 19 Benefits

a) County restrictions are eliminated… The older rules limited the location of the properties in question. Proposition 60 restricted the tax basis portability within one county. Proposition 90 expanded that to a certain list of counties, so you could sell in one county and buy in another, but only if they were on that list.

b) Under Proposition 19… instead of limiting the counties of transfer, you can use this benefit anywhere in California.

c) No more sales price restrictions… Under Propositions 60 and 90, only transfers of “equal or lesser value” were eligible for tax basis portability.

d) A transfer of low tax basis… is now enabled by Proposition 19, regardless of value. However, certain adjustments to the tax basis are required if the purchase price of the replacement property is higher than the sale price of the previous home. 

New Proposition 19 Restrictions for Inherited Properties

On the other hand, under Proposition 19, beneficiaries could see a substantial increase in their property taxes for inherited property. While property tax relief in California had no exclusion or exemption limitations under Proposition 58, current property tax law exclusions under Proposition 19 apply strictly to the first $1,000,000 of inherited property value.

For instance, should your inherited property (i.e., primary residence) be assessed with a market value of $2,000,000 upon transfer to you as the official beneficiary, newly assessed value will be $1,000,000. In other words, $2,000,000 minus $1,000,000 (i.e., the first $1,000,000 of property value) – will equal a $1,000,000 limited exclusion.

Although you are most likely aware of other changes and limitations imposed on California property tax relief, it bears repeating.  As a beneficiary inheriting CA property taxes from a dad or mom, you now have to reside in a home only as a primary residence, if you are to take advantage of the Proposition 19 tax break, providing an exclusion from property tax reassessment at current market rates. You can no longer receive an exclusion from reassessment for an investment property.

Some say the underside to this reveals a change that mainly benefits the realtor community in California – using the Bridges family as their one and only singular example of inheriting CA property taxes from a wealthy parent, in this case a luxury beach- front property being used as a lucrative investment property; saving a great deal in taxes – while renting out to wealthy vacationers for $15,000 per month.

For whatever reason, critics of property tax relief have as yet produced very few specific examples of this type of inherited property used for “rental revenue” purposes, as opposed to “primary residential” purposes.  Incredibly, the property tax law removing Prop 13 and Prop 58 property tax breaks from investment properties is apparently based on this one oft-told, tired tale of the Bridges family!

As you probably also know – as an inheritor, you have only 12-months in order to establish your inherited property as a principal or primary residence, to avoid property tax reassessment. However, if your inherited property value is more than $1,000,000 over the original tax basis, you are most likely still facing property tax reassessment – and this can hit the pocketbook hard. This may encourage you to sell out, if that’s the case.

Help From Property Tax Specialists

If you don’t want to sell your inherited home, you may be inclined  to enlist the help of a property tax consultant like Michael Wyatt Consulting, or Devin Lucas Real Estate for example (great proponents of property tax breaks, and supporters of Propositions 13 and 58); or a trust lender like Commercial Loan Corp, with a loan to an irrevocable trust – and buyout your siblings, if you have siblings, who prefer to sell their property shares from the same inherited property you have received from your parents. 

You can establish a permanent, low Proposition 13 tax base this way, and take over 100% of the inherited property equity, with the trust loan paying off anything owed on the inherited home.   Plus, your siblings will end up with a good deal more cash from the trust loan than if they had sold out to an outside buyer.

Proposition 19 Changes  to the CA Parent-Child Exclusion

Let’s say a parent owns a home that is his or her primary residence plus a rental property (such as an apartment building or commercial building) in California. The home has an assessed value of $500,000 and a fair market value of $3,000,000. The rental property also has an assessed value of $500,000 and a fair market value of $2,000,000. Even though these properties have different current market values, their property tax liability is similar because they have the same assessed value. The combined annual property tax of both properties with a property tax rate of 1.25% is $12,500.

Prior to Proposition 19:  Let’s say the parent in this example wanted to transfer both properties to his son. There was no reassessment on the transfer of either the home or the rental property from father to son. The home before Proposition 19, under Proposition 58, could be transferred to the son irrespective of its’ value, since it was the father’s primary residence, and the assessed value of the rental property falls below the $1,000,000 threshold.

Therefore the combined annual property tax stays at $12,500. Moreover, there were no restrictions on the son’s usage of either property – therefore the son might have used both properties as investment properties if that is what he wished to do. 

Outcomes Under Proposition 19: Let’s say new assessed value of a house is $2,000,000 since the current market value is larger than the assessed value by more than $1,000,000 (i.e., the new assessed value has a current market value of $3,000,000 minus $1,000,000). The new assessed value for the rental property is its fair market value of $2,000,000 because no exclusion or exemption from reassessment at current market rates applies to transfers of property from parent-to-child other than a primary residence.

Yet if it is indeed a principle residence that beneficiary or heirs  are moving into, in keeping with the 12-month inherited property move-in deadline – all the bells and whistles really are still there to be taken advantage of – such as inheriting CA property taxes from parents,    having the right to continue transferring property taxes while avoiding property tax reassessment, while being able to use a Proposition 19 loan to an irrevocable trust to keep a parents low property tax base as well as buying out siblings’ inherited property shares – formerly a Proposition 58 transfer of property between siblings…

By the same token, heirs or beneficiaries of inherited property can make full use of any property tax transfer as long as these new restrictive requirements are met…  an inheritor can transfer parents property taxes and likewise keep parents property taxes thereafter upon inheriting CA property taxes from ones’ father or mother – and complete the process with a parent-to-child transfer and parent-child exclusion.  Californians are still able to successfully avoid property tax reassessment by inheriting CA property taxes from parents, in the final analysis, keeping a low property tax base when inheriting a home. The key to property tax relief in all 58 counties in California.  

The new combined annual property tax will be $50,000. In addition, the son has to use the inherited family house as his primary residence or that property is sure to be reassessed at the current market value of $3,000,000, which will increase the combined annual property tax for both properties to $62,500.

You see the difference? This accounts for the growing push-back on Proposition 19…despite all the positive elements that come with this property tax measure.

Propositions 58 & Proposition 19 Trust Loan

Proposition 19 Trust Loans How To Keep a Parents Low Property Tax Base On An Inherited Home In California

Proposition 19 Trust Loans
How To Keep a Parents Low Property Tax Base On An Inherited Home In California

Trust Loans: Keeping a Low Property Tax Base

California trust loans are commonly used to establish a low property tax base for beneficiaries inheriting a parent’s home, working in conjunction with California tax break Proposition 58 and California Proposition 19. 

This process, often involving a loan to an irrevocable trust, also sometimes resolves inherited property conflicts between siblings by providing needed cash for a trust distribution. In case you didn’t know, after Feb 2021 the popular Proposition 58 parent to child exclusion (from property tax reassessment at high, current market tax rates) is now essentially the Proposition 19 parent to child exclusion. It has basically morphed into the new  Proposition 19 property tax measure – yet still enabling most  beneficiaries to buyout their co-beneficiaries’ shares of inherited property and avoiding property tax reassessment for themselves, retaining a parents low property tax base going forward.

In other words, it’s still possible to buyout  a siblings portion of an inherited home and keep a parents low property tax base using California Proposition 19.  The process is sometimes refer to as “a transfer of property between siblings” or “sibling to sibling property transfer” – funded by an irrevocable trust loan – from a trust lender specializing in the trust loan and CA Proposition 58, Prop 19, and Prop 13, process. 

Moreover, it’s still possible, thankfully, to transfer parents property taxes when inheriting property.  The ability to continue inheriting property taxes, to keep parents property taxes basically forever on any property tax transfer through the parent to child transfer and parent-child exclusion, is still intact and protected by Proposition 13 and to a more limited degree by Proposition 58  and now Proposition 19.  Exactly for how long, we’re not sure — which is why voters must keep a close watch on critics of property tax relief in California, on the realtor community, and on the CA Legislature.

If you are interested in taking advantage of your California Proposition 19 property tax benefit and avoiding property tax reassessment on an inherited home, we suggest calling Commercial Loan Corporation at 877-756-4454 when a third party loan might be needed to provide the funds needed to equalize a trust distribution and buyout siblings. You may also complete the online California Proposition 19 Parent to Child information request form located here.

When a child is inheriting a home from a parent and would like to use Prop 58, or Prop 19 to keep a parents low property tax base it is still entirely possible to do so!  You may be inheriting a home from a parent, in trust, yet if there are not sufficient cash assets in the trust to make an equal distribution, then a loan against real estate in the trust will be needed to qualify for the parent to child transfer to avoid property tax reassessment – and this can still easily be done, with the right property consultant or trust lender, such as Commercial Loan Corp in Newport Beach, CA or Michael Wyatt Consulting in Corona, CA; despite some imposed limitations from California Proposition 19.

How Has Prop 19 Changed Inheriting California Property and Home Ownership?

How Has Prop 19 Changed Inheriting California Property and Home Ownership?

How Has Prop 19 Changed Inheriting California Property and Home Ownership?

Proposition 19’s supporters would like to reduce Prop 13’s less attractive elements and implement what they would call, “freeing-up long-term homeowners.” 

Prop 19 is expected to generate increased house sales, as well as realtor and broker commissions, which is why Prop 19’s largest supporter, the California Realtors Association spent $40,400,341 to get Prop 19 passed, and the National Association of Realtors kicked in $4,800,000 to promote such a hard-to-sell property tax measure.  The $100,000 donated by the California Professional Firefighters union to Proposition 19 pales in comparison.

Proposition 13, which passed in a landslide way back in 1978, was a unique amendment to the California Constitution which capped residential property taxes on a primary residence to 1970s levels, capping them at 1% of assessed value (plus local additions, by county).  Assessments were allowed to rise at a maximum rate of 2% per year — even though prices on real estate in California continued to increase in most of the state’s 58 counties.

Properties would be reassessed at current market rates when a total change of ownership occurred, either by death, gift, or sale — when the property in question is “transferred”.  What the CA State Board of Equalization calls a “change in ownership.”  Deceptively simple terminology for a rather complex process; made even more complex these days by varying state taxes and Coronavirus issues, verified at property tax relief websites and niche blogs like Property Tax News or Loan To A Trust.

 Inheriting California real estate and home ownership in general is different now as far as property taxes are concerned.  If a homeowner in any county bought a $2,000,000 home today, without any property tax breaks, they might pay roughly $25,000+ per year in property taxes.  A family in a nearby $2,000,000 home that’s been there for let’s say 30 years may owe merely $2,500 per year.  But it’s all relative.  Certain politicians complain about this type of inequity… however  if you bought property 30 years ago, would the same property cost the same last week?  Of course not.  So why should taxes be any different.  

Under Proposition 19, the only low Proposition 13 tax base that can be transferred to your children is that of your principal residence to your heirs (offspring).  Subsequently,  your heirs have to reside in that home also as   their primary residence.  And if that inherited home is valued at more than $1,000,000 it may be partly or completely reassessed by the local  tax  assessor, with a partial or total loss of their Proposition 13 parent-to-child exclusion property tax break.  It is not entirely clear yet how all of this will shake out once the dust settles on this. 

However the entire concept of installing a property tax hike in the midst of a flagging Pandemic economy with growing unemployment and under-employment; or even the decision by the Legislature to  promote a Proposition 19 tax hike in 2021 — to water down middle class homeowners’ ability to avoid property tax reassessment is under a spotlight and being seriously questioned in light of basic survival, and even retirement, by respected economists, academics and analytical websites.   

In most cases, Proposition 19 will effectively eliminate a parent’s right to transfer a low property tax assessment to heirs, since it is unclear at this point how  many heirs or beneficiaries inheriting their parents’ home will be all that excited about  moving into that inherited home as a primary residence — and within 12 months at that. It may be too small for a large family.  Work places may be too far away to be convenient.  School districts could b e a major issue.  And so on. 

Moreover,  many homes are worth far more than $1,000,000 in California. That makes Proposition 19, despite it’s many positive benefits, a liability for many inheritors… with challenging  outcomes for certain taxpaying residents who have inherited California real estate.

The folks who benefit from Proposition 19 are embraced clearly in its’ promotional title: “Home Protection for Seniors, Severely Disabled and Victims of Wildfire or Natural Disasters Act.”  Exactly what the definition and application of  “severely disabled” is, remains to be seen.  As mostly everything with this particular Legislature, it would be safe to say that there are a lot more assumptions in play here than specific, concrete projections that are backed up by well researched data and factual analysis. 

We can assume that homeowners who are over the age of 55, disabled or supposedly “severely” disabled, who have been harmed by a forest fire or  some other natural disaster of some kind,  will be able to transfer the assessed value of their primary California residence to a new home anywhere within the state’s 58 counties. 

This revised property tax relief procedure may be repeated  three times in a lifetime, supposedly, and so homeowners now have two years to transfer their Prop 13 low property tax base.  And one can still expect (with more limitations now built into the process) to be able to take advantage of trust lenders with a loan to a trust if the goal is to buyout co-beneficiaries (i.e., siblings) looking to sell their inherited property shares, as a transfer of property between siblings, with a loan to an irrevocable trust. 

So no matter what, at least for the moment, Californians can still make good use of a property tax transfer from a parent, a Prop 13 low property tax base — under the CA Proposition 13 transfer of property — and transfer parents property taxes, with the sole objective to   keep parents property taxes regardless, when inheriting any kind of property more or less, and inheriting property taxes under California’s parent to child transfer, known as the  parent to child exclusion — which has been the number one target anti property tax relief parties want to  water down, or even repeal.                

Additionally,  if the homeowners’ new house is assessed at a higher value  than their previous home — their property taxes might go up, however not  as high as they would have been before Proposition 19 went into effect. So there is helpful property tax relief here if you look for it, such as being able to establish a Prop 13 low property tax base.  It is just not quite  as simple and straight-forward as it once was, before Proposition 19 more or less replaced Proposition 58 in the sunny state of California, in Nov. of 2021. 

Strengthening Proposition 19 Property Tax Relief During a Pandemic

California Prop 19 Property Tax Transfer

California Prop 19 Property Tax Transfer

In the midst of a relentless Pandemic, causing untold economic carnage, unemployment and financial damage  to middle class Californians, it would be advisable for the state to provide middle income and working class residents with the ability to not only make more money, if that were to be possible,  but to be able to spend less.

One proposed solution to accomplish this – proposed by respected real estate analysts and property tax consultants – would be expanded property tax relief; despite certain limitations and obstructions from special-interest groups and changes to Proposition 58.   Proposition 19 property tax breaks should most likely be strengthened in favor of property owners, with a robust initiative led by the Governor – rather than an unhelpful deferred property tax payment plan, such as he has already suggested.

Forward thinking tax consultants such as property tax consultant, Proposition 13 specialist, Michael Wyatt Consulting have proposed property tax breaks that save homeowners, commercial property owners, and beneficiaries inheriting property more money from property tax breaks than are currently in place.   

Well known Trust and Estate Lender  Commercial Loan Corp, furnish trust beneficiaries with irrevocable trust loans, working in conjunction with Proposition 19 benefits, can establish a low Proposition 13 property tax base for homeowners, and save inheritors thousands of dollars every year in property taxes.

These property tax reduction measures – as long as homeowners make good use of them and keep inherited property, or allow other siblings or co-beneficiaries to buyout their shares  of inherited property through a trust loan working with Prop 58 tax breaks – will avoid property tax reassessment.  This process will, in fact, create a low property tax base for the singular owner or owners of this shared inherited property.  And there indeed is one solution to enable homeowners to spend less.  

This helps middle class property owners and working families to not only spend less, but also to retain more cash in  their bank and investment accounts. Most importantly, this type of trust loan financing also helps trustees and beneficiaries resolve disputes  over assessor stated property values – as well as resolving often heated conflicts over whether they should sell to an outside buyer, or profit more by allowing a co-beneficiary to buyout their property shares while avoiding property tax reassessment of this family property altogether. As realtors call it, “transfer of property between siblings” or “sibling to sibling property transfer” – lending money to an irrevocable trust, for trust loan financing  – can resolve various squabbles and infra-family problems between estate heirs and trust beneficiaries. 

Noted originator of trust loan financing, Commercial Loan Corp President Kerry Smith; and other outspoken supporters of property tax breaks for the middle classes, such as Property Tax Relief Consultant Michael Wyatt,  Jon Coupal, President of the Howard Jarvis Taxpayers’ Association; and Paramount Property Tax Appeal President Wes Nichols, have all stated, repeatedly, that Proposition 13 and Prop 58 should be better protected and expanded; That Proposition 19 should be expanded to better serve homeowners; and at the same time strengthened in the courts so Amendments that can potentially wipe out property tax breaks like Proposition 58 for example, in a single vote, will be impossible to advance without a great deal of trouble and expense.

California, since 1978, is the only state where you can avoid property tax reassessment at current rates; but the state does need to better protect, not water down, residents’ property tax relief options; to keep parents property taxes… and to transfer parents property taxes as well as inheriting property taxes at a low base rate for even a secondary inherited property.

Avoiding property tax reassessment is a crucial tax relief element, and therefore should be better  protected, for new homeowners and beneficiaries inheriting a home and/or buying out a sibling’s share of inherited property   the transfer of property between siblings, sibling to sibling property transfer, the right to transfer parents property taxes when inheriting property taxes – so beneficiaries can keep parents property taxes at its’ original low base rate… which applies to every  property tax transfer,  meaning every parent to child transfer and family parent to child exclusion.

Helpful information on Proposition 13 & Prop 58 as well as property tax appeals and property tax reduction solutions can be found at niche Websites like the CA State Board of Equalization and here at Property Tax News.  Or look carefully at various sections and articles at Loan to a Trust or at  detailed, more sophisticated trust loan info-websites.  Every property owner should know what’s involved with inheriting property taxes at a low rate, or a beneficiary buyout of sibling property shares, or “transfer of property between siblings” – with new, revised Proposition 19 basic property tax relief opportunities that are available to Californians, come rain or shine.