Property Tax Relief for All Americans, Not Just California

Property Tax Relief

Property Tax Relief

A recent survey from Ameriprise Financial:

  • Discovered that 65% of Americans have never written and   signed off on a Will;
  • 77% of Americans plan to leave a financial inheritance for their children or grandchildren;
  • 64% of Americans believe they are actually in a position to even leave an inheritance of any kind to their children;
  • only 50% of aging American parents have an estate plan in place reflecting inheritance assets being left to their children.

Some retirees are committed to leaving money and assets to their children; while other parents see it as “a good thing to do”… yet “not essential” as part of their plan for retirement. Not exactly a sign of high interest on the part of parents, is it, where leaving money to their children are concerned!

However, middle class and even upper middle class families in the United States are understandably concerned about cash flow, and the future of their net worth.  Exacerbated by increasing concern over the variant Covid virus issues; which further discourages  parents from leaving anything at all to their children upon passing away… virus or no virus.

These concerns are causing many families in America to believe that all states in America, not just California, should have tax relief laws benefiting middle class, lower middle class and upper middle class consumers, not just tax cuts and property tax breaks for wealthy residents.

Different state economists are looking specifically at property tax relief for their state, as this is one of the simpler areas to affect in this manner to help free up more consumer cash, and thereby improve their overall economy in this fashion, step by step.

Allowing beneficiaries of trusts and heirs of estates to be able to access genuine property tax relief… with the ability to get a loan to an irrevocable trust from a trust lender, when parents leave a home to them as an inheritance.  This enables these folks to keep their family home, inherited from parents, at a low property tax base.

This process also enables beneficiaries to buyout sibling beneficiaries – or as attorneys put it, “the transfer of property between siblings, without a direct sibling-to-sibling transaction” – by lending money to an irrevocable trust – typically from an irrevocable trust loan lender, who can guide your ability to buyout sibling beneficiaries, and show you how you’re putting a lot more cash in siblings’ pockets when you go through a trust loan to buyout sibling beneficiaries. The fact is, we need to know our rights, with respect to these unique tax breaks. 

Homeowners and beneficiaries in all states should know how to buy out beneficiaries’ shares of inherited property; and how sibling-to-sibling property transfer works. Moreover, all Americans should know how loans to irrevocable trusts can help co-beneficiaries get cash while avoiding selling their share of an inherited house – keeping yearly taxes on property at their parents low tax base.

All middle class Americans should be aware of  the California system, of California advantages of inheriting parents property and thus inheriting property taxes that are lower and can remain low. Property tax transfer is an unknown in so many states…whereas  inheriting a parents’ low property tax base, and avoiding property tax reassessment, as well as being able to buyout sibling beneficiaries with a trust loan – should be known to all, and be a normal state of affairs in all states.  It certainly is a “best kept secret” for wealthy families all across America!

Property owners in other states can surely find the time to start the ball rolling to start adopting these property tax relief laws, plus they should be able to see how these types of yearly savings free up cash for many homeowners to be able to purchase a larger home later on.

This would feed more sales activity and cash back into the local economy, with loans to trusts to avoid property tax reassessment, working in concert with new property tax measure that became active in Feb of 2021, California’s Proposition 19 – which used to be the ultra popular Proposition 58, enabling exclusion from current tax rates with a parent to child property tax transfer – along with Proposition 193 for grandparent-to-grandchild exclusion from high fair market rates.

Designing a system like this that has been so successful in California would keep property taxes at a much more equitable system state by state, whereas right now most states do not have a system in place similar to California are not offering middle and lower middle class families a sustainable system within which they can thrive and increase their spending ability.

Californians would then be able to give back more consistently into the general overall economy – inheriting property taxes they can afford, hence being able to maintain inherited property, while helping to increase overall intra-state consumer spending. Creating positive overall financial connectivity, instead of separate declining family spending capabilities, which do not benefit the whole at all.

Economists in many states now believe that within struggling families, if beneficiaries were able to transfer a low property tax base from parents, with an iron clad right to keep parents property taxes as a part of the inheritance process, from parents and grandparents – middle class, upper middle class, and working families would all benefit greatly, and at the end of the day their state would benefit as a whole as well.

If this system were in place in other states, families would be able to free up more cash to spend on goods and services all across their state, thereby benefiting merchants and other consumer businesses, benefiting their families, so they can spend more, moving more cash into the economy, and so on – benefiting each state economy all the way around in every state that shifted in this direction with property tax relief measures designed to help not only individual homeowners and beneficiaries but each state in general.

Saving money on inheritance based property transfers would (as it does in California) allow middle class and upper middle class beneficiaries who do not wish to sell out to keep their parents’ home in the family, which most middle class inheritors otherwise could not afford to do. And yet, unfortunately, California is still the only state that provides a systemic system to help residents avoid property tax reassessment at current, unaffordable rates.

This sort of property tax relief program… capped at 2% taxation, as offered by the 1978 CA Proposition 13 would allows residents in other states to keep parents property taxes, and inherit property taxes at a low property tax base… having the ability to use a Proposition 19 style property tax transfer, with a parent-child transfer or parent-to-child exclusion.

The Function of a CA County Assessors Office

The Role of the County Assessors Office

The Role of the County Assessors Office

The CA County Assessor’s Job

As we all know, property taxes in California are determined by the value of our property. Every county Tax Assessor has to identify and calculate the value of many different types of taxable property in all 58 counties in California, as well as deal with property tax appeal challenges, as they come into the Assessor’s office.

The Assessor has always been independently elected in California, and is supposed to be completely objective, working for the people (i.e., voters) in each Assessor’s county – to be able to avoid political or financial influence from any governing county body; to avoid coercion from any city, school or district to accelerate the number of county tax assessments in order to generate more property tax revenue.

Principle Tax Assessor Responsibilities

The Assessor is charged with making sure property owners in California are taxed at the appropriate rates; ensuring that county public services are receiving the funding they need to continue functioning. Tax Assessors have to locate real property, land, various taxable structures via maps, which reveal every known land parcel, along with an “assessment roll”, which details improvements on property as well as ownership. It’s worth noting that household furnishings, livestock for the most part, and business inventory are no longer considered “taxable property”.

Four critical duties Tax Assessors must address are:

1. Locating taxable property

2. Identifying the owners of all taxable real estate

3. Determining the assessed value of all taxable property

4. Publishing yearly assessment rolls, plus supplemental reporting

Locating Taxable Real Estate

The Assessor must locate real property, land, various taxable structures via maps, which reveal every known land parcel, along with an “assessment roll”, which details improvements on property as well as ownership. It’s worth noting that household furnishings, livestock for the most part, and business inventory are no longer considered “taxable property”.

Property Assessment:

Since 1978, California’s property tax system (under state constitution Article-13a), is typically referred to as Proposition 13; with an Amendment in 1986 adding Proposition 58 to the process which provided a parent-to-child exclusion, and allowed beneficiaries to buyout property shares inherited by co-Beneficiaries… abruptly replaced and somewhat altered in Feb of 2021 by Proposition 19; although still providing homeowners and beneficiaries with property tax relief from property tax transfer benefits avoiding property tax reassessment with the right to transfer  and keep parents property taxes when inheriting a home, and  thus inheriting parents’ property taxes with the help of a parent-child transfer, and parent-to-child exclusion from current, or “fair market value” tax property rates.

Proposition 13 evaluates real estate at the 1975 “fair market value”, including factoring in heirs inheriting parents property taxes; with yearly increases curtailed at a 2% or the inflation rate, as measured by the CA Consumer Price Index – or whichever is less.

Real property is reappraised by the Assessor for tax purposes only when there is a change in ownership; new construction on property has been completed; new construction has not been finished as of the “lien date” (Jan 1); or market value has dropped below Proposition 13 factored value on the lien date.

Reappraising Real Property in California

When any taxable property is reappraised due to change of ownership a Tax Appraiser will examine sales of similar properties. Or if the property happens to generate revenue, the Appraiser will execute “an income approach”. If the real property in question is original and unique the Appraiser could potentially use the amount of money, or budget, the property owner spent on construction – or perhaps research industry-wide studies on similar construction, and use those costs instead to base the appraisal on.

As soon as that property has been evaluated, the property owner will be contacted and notified of the new property reassessment, or evaluation, and will be given the opportunity to review and discuss with the Assessor. If the property owner happens to disagrees with the reassessment, the property owner can always apply for a property tax appeal or “revised assessment” with the local Board of Assessment Appeals.  Or enlist the help of a property tax appeal firm.

Property like boats or airplanes are assessed every year based on up-to-date Blue Book information distilled from market sales. Trade equipment is also assessed every year, using a formula based on original cost and age of the equipment.

If none of these items apply, the assessed value of a property can be increased by no more than 2% per year. Sale price of a property is considered be its’ market value unless the Assessor can prove convincingly that market value is not accurately reflected by the sale price. The Assessor is also expected to revise the sales price of a property to prove any value that can be attributable to items that are exchanged in a sale, not for cash; perhaps such as barter.

In many respects, Proposition 13 changed the rules in California – as explained by the County of Napa.org website, which tells us:

Prior to the passage of Proposition 13 in 1978, the Assessor reappraised all properties on a four-year cycle, with entire neighborhoods receiving increases in value based on recent sales in that area. Under Proposition 13, values are established at a base year, either as of March 1, 1975, or as of a change of ownership or new construction.

Proposition 13 requires an annual inflationary adjustment, not to exceed 2%. A property with a 1975 base-year value of $100,000 has a cumulative adjustment over the past 43 years of 211%, resulting in a current factored base year value of $211,000. Thus the function of the assessor has gone from doing mass appraisal impacting many properties to an individual appraisal of properties that have changed hands or had new construction.

Ownership records are maintained from documents obtained from the County Recorder. Assessor maps are updated as parcels are subdivided or their boundaries adjusted. Building permits are reviewed for accessible new construction and appraisers make discoveries in the field.

County Assessors Offices, Auditors, Auditor-Controllers, Clerks of the Board & Tax Collectors can found in all 58 counties across  the State of California: Here ~ on the BOE Website

Financial Firms Help Californians Lower Property Taxes & Stabilize Financial Standing

Keep a low property tax base on an inherited home

Keep a low property tax base on an inherited home

Help From Property Tax Specialists – Bridging the Wealth Gap

Important cities responsible for growing jobs and driving opportunities that generate revenue for consumers, such as Los Angeles, San Diego, San Jose, San Francisco, Long Beach and Anaheim – have all experienced population shrinkage since 2020, due in part to shrinking real estate possibilities as well as unreliable employment, fluctuating sales conditions and unstable economic conditions overall.

Some financial services companies are looking to help reverse this trend and contribute to building a more positive economic and business environment for residents to thrive in, rather than struggle in.

Contributing time and effort towards helping beneficiaries that are inheriting property yet are in danger of falling prey to increased property taxes and limitations to property tax breaks – some financial services companies include middle class and upper middle class families in their suite of services, as opposed to just focusing on wealthy families as many investment, lending and wealth management firms do.

Examples of property tax professionals who are more open to helping middle class Californians are specialists like Advanced Tax & Estate Planning, Trust Administration attorney Rachelle Lee-Warner, at Cunningham Legal, Michael Wyatt Property Tax Relief  Consulting, or Estate & Trust Lending firm Commercial Loan Corp – all who do in fact include middle and upper middle class families in their wide range of property tax services. 

These firms, and others, are now seeking broad, proactive ways to reach and assist middle class and upper middle class homeowners and beneficiaries expecting to inherit business property or a home from parents, yet find themselves to be victims of financial bias… unable to enlist the help of high-end property tax experts due to their middle class, or rather non-wealthy, financial status.

Free Property Tax Savings Estimate & Consultation

To help preserve net worth for middle class families, the trust lending firm mentioned above recently decided to offer a free consultation & estimate for property tax savings to California middle class and upper middle class homeowners and beneficiaries, as well as affluent residents, all who want to avoid property tax reassessment by keeping parent’s low property tax base… locking in the same low tax rate their parents enjoyed.

Property tax firms are looking to help residents work around obstacles associated with a Proposition 19 parent to child property tax transfer on an inherited home, and is well known for providing ways to save new homeowners and heirs of estates and trusts thousands of dollars in annual property taxes. They are also assisting beneficiaries with applications for trust loans to buyout siblings that are also inheriting property but wish to sell their shares.

This type of consultation helps residents to evaluate, in-depth, the benefit of a loan to an irrevocable trust, and various financial options associated with property tax transfers in California – plus buying out co-beneficiary siblings who are looking to sell their share of an inherited property. Moreover, going through a trust lender  you trust; keeping your parent’s low property tax base when inheriting a home

Firms like Commercial Loan Corp work with families to help them preserve their modest financial security; alongside their attorney, accountant or property tax consultant; and assist family members and beneficiaries by helping them avoid property tax reassessment at current market rates, and determine through in-depth consultation how much a family can expect to save on property taxes,

On average this saves more than $6,200 per year, per beneficiary; as well as weighing costs and benefits of a trust loan working alongside Proposition 58 – now for all intensive purposes having morphed into Proposition 19. This enables a simple buyout of inherited property from co-beneficiaries, providing them with more money than an outside buyer would furnish them with; while keeping parents’ low property tax base.

Thaddeus Farrell, Account Manager at Commercial Loan Corp, offers an Insider’s Viewpoint on Estate & Trust Lending

We guide beneficiaries through a process that will maintain their parents’ low property tax base. Usually siblings that want to retain inherited property from parents come to us first, generally after being referred to us by a law firm. Middle class families that can’t afford to pay reassessed taxes on an inherited home… Which pretty much sums up most families these days…

… property reassessment can cripple a family financially. I look at it like this – expenses are a part of life, and when you inherit a family home, if the property is reassessed at current rates, those expenses will usually go sky high. Most middle class people can’t afford to pay that type of tax hike. They want to take advantage of Proposition 19 and a trust loan, transferring CA Property Taxes from a Parent to an Heir tax break, to avoid property tax reassessment, and move into an inherited home within a year as a principle residence, which was their parents’ principle residence formerly protected by Proposition 58 and Prop 13.

Siblings inheriting a home have two options. They can sell or keep their inherited property. In other words, your family has to make up their mind – what they want to do, sell or keep. Selling it is far more expensive. By keeping the home, each beneficiary receives approximately $15,000 extra in a cash trust distribution when compared to selling the home because they avoid costly realtor and real estate sale expenses. The child beneficiary keeping the inherited home winds up saving on average $6,200 in yearly property taxes.”

Where to get help from Property Tax Savings professionals

Families, beneficiaries, or their attorneys, who want to take advantage of Commercial Loan Corp’s Free Consultation for Property Tax Savings and/or speak to attorney Rachelle Lee-Warner about Proposition 19, at Cunningham Legal; or perhaps discuss the facts with Michal Wyatt Consulting, in terms of keeping parent’s low property tax base; or to receive a trust loan to buyout co-beneficiaries’ property shares, and learn more about keeping parents’ low property tax base when inheriting family property – can call (877) 756-4454 and set up a free evaluation in person or over the phone.

What is Proposition 13?

What is Proposition 13?

What is Proposition 13?

Proposition 13 (i.e., People’s Initiative to Limit Property Taxation) is an amendment to the California Constitution, and was passed by voters in California on June 6, 1978 by close to two-thirds of the voting public. Proposition 13 was designed to decrease property taxes on homes, businesses, and farms by 57% – preventing property tax rates from exceeding 1% of a property’s market value. Property tax reassessment would no longer be able to increase by more than 2% per year, except when a property was sold to a valid buyer.

Boiling Point for the Middle Class & the Elderly

Before the advent of 1978’s Proposition 13, property taxes were notorious in terms of being completely out of control in California, in  all 58 counties. Reports and complaints of, for want of a better term, taxation abuse – were mounting.  Homeowners, especially elderly residents, were losing their homes due to the simple fact that they were unable to pay their rising property taxes. And yet state and local government officials did absolutely nothing to help.

Stories swept across the state like wildfire describing how senior retirees, military veterans, and elderly widows all living on modest fixed incomes were literally being thrown onto the street for late payments; or simply being unable to pay off increasingly high property tax hikes.

By the late 1970s,  property tax burdens were unbearable in the state of California; and just as important – unsustainable for working families, middle class, and even upper middle class homeowners. Obviously, wealthy and ultra wealthy residents could absorb pretty much any tax hike. But that’s merely 1%  or 2% of the entire state.

For elderly middle class folks dependent on fixed incomes, the outcome in the 1970s was frequently a forced sale of their beloved family home – typically the only asset of any real value they owned. And that was what Californians saw month after month, year after year – retirees and middle class working families either selling off their home, their most precious asset, or giving it up to the tax man against their will.

There was even a story circulating around of an elderly woman having a heart attack due to stress while visiting the Los Angeles Tax Assessor’s office, when she couldn’t convince the authorities to take her seriously and lower her tax bill…

Another good example of the state’s inflexible, intractable position on property taxes is a story from the 1920’s concerning a retired couple, as reported in the Newhall Signal newspaper in Newhall, CA. Because this elderly married couple lived in a small home, close to an upscale brand new apartment building, the County Tax Assessor decided to reassess the couple’s tiny house at the highest possible tax rate – as if the land their little home was on would soon boast a massive high-end hotel!  Their small home was taxed at $1,800 per year, regardless of the fact that the retired couple’s total fixed income was $1,900 per year.

Hence, support for Proposition 13 swept the state and filled local newspapers with headlines and reports on this urgent statewide  phenomena. Californians began thinking seriously about what it actually might be like to not be financially crippled  every year by mounting property taxes. 

The Howard Jarvis Taxpayer’s Association Viewpoint

The Howard Jarvis Taxpayer’s Association recently wrote: “The San Francisco Assessor was taking bribes to keep business taxes down below the market value. He went to jail. To make sure the valuations were correct and equal in San Francisco, the new assessor used computers.  When a property sold in a neighborhood,  all the surrounding properties found new tax bills reflecting a new market value, resulting in great increases in taxes for everyone. Property taxes went up so quickly in San Francisco that bumper stickers soon appeared pleading: ‘Bring back the crooked assessor!’

The private sector of the economy fared beautifully in the aftermath of Proposition 13, but some people questioned whether this private sector success might not have come at the expense of the public sector. Opponents of the tax cuts voiced concerns that the tax reductions might have gone too far requiring excessive program cuts. Vital services, they said, would suffer, schools would have to close, and fire and police protection would no longer be adequate. Yet in spite of the precipitous fall of the state’s average tax rate, state and local revenues did not fall proportionately. The total general revenue for local governments fell only 1% in the year following Proposition 13.  By FY 1980 revenue had risen more than 10 % the FY 1978 level. The tax base expanded by more than enough to offset the reduction in tax rates.”

Tax Hikes No More

Basically, Proposition 13 managed to lower property taxes by assessing properties at their 1976 value, while capping annual increases at 2% – not allowing property reassessment of any new base year value – with the exception of the home being sold to a new owner… or on the completion of any new construction on the house. 

As of 1978, to everyone’s relief and delight, all residential and commercial real estate owned by an individual, a family, or a corporation was  impacted by new  Proposition 13 property tax    relief measures such as transferring property taxes in California, namely a parent to child property tax transfer or parent-child exclusion  for all types of property  owners – and protected property tax transfers and the right to transfer parents property taxes  when inheriting property and inheriting property taxes. 

Beneficiaries could keep parents property taxes basically forever, or as long as they resided in their inherited residence as a primary home. This was what everyone had been waiting for, and was desperately hoping for.  With added amendments later on, such as the wildly popular Proposition 58 in 1986, with all sorts of California beneficiaries getting trust loans to buyout property from siblings, while locking in a low Proposition 13 based property tax base.

Another lesser known component to this tax measure, that many families did not even take note of, was an important new step that required a two-thirds majority in both CA Legislative houses to implement any further increases of any state tax rates or revenue charged, which included highly sensitive income tax rates.

A two-thirds majority vote was also imposed on local elections affecting local governments who otherwise,  perhaps on a Friday evening  blitz when no one was looking, would happily increase some sort of special interest tax, before the other party could stop them. A two-thirds majority vote would prevent that from happening going forward.  So Proposition 13 wasn’t just about homeowners getting the right to transfer parents property taxes.

For the first time in the state of California, taxation was capped at a strict 2% rate.  For the first time property tax relief (in practice as opposed to lip service), was accessible for middle class, upper middle class and working families – with its’ foundation built on a “base year value” for property tax reassessment, with enforced limits to state property tax rates and limits to increases through arbitrary property reassessment.

California Base Year Values

CA Proposition 13 locked in three critical restraints for property tax reassessment: (a) All real estate now had non-negotiable iron-clad base year values; (b) restricted rates limited property reassessment to a 2% yearly increase; and (c) a property tax limit of 1% of the assessed value was imposed along with the right to transfer parents property taxes and the parent-child exclusion.

Once Proposition 13 passed, property assessments for 1978-1979 were required to be “rolled back” to 1975-1976 property values, establishing the first base year values in California. Properties that have not sold or undergone new construction since February 1975 are viewed as having a 1975 base year value.

Reliable Property Tax Expectations

Because of Proposition 13, for the first time, certainty in taxation lay in the hands of the taxpayer instead of the tax collector. Proposition 13 set up an acquisition value system that treats all homeowners alike in that they pay 1% of the market value established at the time of purchase; limiting increases to 2% per year – creating a an even playing field for all property owners.