Trust Loans & Sibling to Sibling Buyouts

Trust Loans

Trust Loans

How inherited property is to be shared by siblings, as stated in writing by parents in a Will, is a logical starting point for an estate.

Avoiding reassessment with irrevocable trust liquidity 

Sometimes, parents leave a larger share to one or two siblings and divides the balance of the estate among remaining beneficiaries. Whenever more than one sibling is left an inheritance involving property, all heirs and/or beneficiaries have to be in agreement as to how to proceed with that property – regardless how large or modest each beneficiaries’ share of the estate is.

When siblings are involved in an irrevocable trust liquidity solution – when you want to buyout siblings’ inherited property shares –  beneficiaries looking to buyout siblings have no choice but to consider the fact that an irrevocable trust loan can furnish liquidity and work in tandem with Proposition 19 to keep property reassessment low.  Something you can’t ignore, or simply walk away from.

You still have to get an appraisal for valuation of your inherited home and come to an agreement on an intra-family selling price. Then get final approval for financing… and distribute proceeds to all siblings wanting to sell out.

Knowing your options, and how to navigate the different stages in the process… is the challenging part.  Which is why you need an excellent trust lender and estate attorney — to help guide you through critical steps.

Beneficiaries looking to keep their inherited home should always get inherited property inventoried,  and valuation finalized… Plus:

•  Always  try to avoid intra-family conflict from reaching litigation, and mediate your estate situation to the point of reaching a cordial and equitable point of communication with your siblings.

•  Try to identify and enlist a reliable, established loan lender as soon as possible – who can project a realistic number with respect to property tax savings, with Proposition 19 working in conjunction with an irrevocable trust loan.

•  Consider all inheritance loan and refinancing options, such as an inheritance cash advance; probate cash advance assignment; trust advance; or irrevocable trust loan in concert with Prop 19. 

Under Prop 19 property tax relief, siblings need to consider:

1. How well all beneficiaries get along, or do not get along – and what the issues are that must be mediated and ironed out if resolution is to be reached…

2. What is agreed upon, with respect to the disposition of an inherited home…

3. How motivated siblings are to resolve problems – in order to reach final disposition of inherited property in a timely manner…

4. Who is insisting on selling off their inherited property shares, and who is determined to retain the family home…

5. When and if all sibling beneficiaries are in agreement, in terms of selling out or keeping inherited property. 

6. And lastly, as most of us know, an irrevocable trust has to be understood as an instrument that is profoundly different than all other trusts.

As we all know, a trust can be revocable, where a trustor can change or terminate the terms & conditions of the trust anytime.
When a trustor passes away a revocable trust becomes totally  irrevocable – no matter what the issues are.  When a trust becomes irrevocable nothing can be revised or changed – real property, beneficiaries and terms & conditions are locked in.  

So when a California irrevocable trust requires liquidation, it can be used in numerous ways that can greatly benefit trust estates, beneficiaries and families in general.

A trust loan is a loan offered typically by specialized private lenders directly to an irrevocable trust.

This type of loan utilizes property from the trust as collateral. To take out a trust loan, trust documents must permit trustees to use trust property as collateral for the loan.

Lenders like banks and credit unions have no interest in “providing liquidity” to irrevocable trusts in the state of California. This is mainly due to the complicated nature of this property tax relief solution, the lack of a personal guarantee, plus the various complex challenges involved in financing of this type. 

Private lenders, like Commercial Loan Corp, or trust loan property tax consultants like Michael Wyatt Consulting, for example, form a bridge for beneficiaries and trustees looking for liquidity in their trust.

As we always see in the final solution, an irrevocable trust can accept a loan for several reasons, the most important being to “furnish liquidity” in conjunction with CA Proposition 19 in order to provide beneficiaries with access to a low property tax base… guaranteeing low property reassessment, most importantly.

Along with enough capital to buyout siblings…  Commercial Loan Corp, for example, provides more cash than a realtor driven buyout with a third party buyer could possibly provide – given their 6% commission structure, transaction fees, fixer-upper costs, and other ancillary charges.  So everyone is able to walk away happy, as a result of a genuine win-win outcome.  And moreover, besides that, many eligible California homeowners are moving quickly on new CA property tax relief opportunities 2022

If you are in the process of inheriting a home, or recently inherited a home and would like to see if you are able to avoid property tax reassessment, you can reach Commercial Loan Corporation at 877-464-1066. Or use the following web form to learn more on trust loans and parent to child property tax transfers. 

What Are the Crucial CA Proposition 19 Property Tax Benefits?

CA Property Tax Benefits, 2022 Onward

Despite confusing, often deceptive messaging, designed at all  costs to get Proposition 19 voted into law in The Golden State of  California – it’s clear to most Californians that Proposition 19 property tax breaks really will increase property tax relief measures for homeowners over age 55, plus add exclusions from  property taxes for homeowners who are victims of wild-fires and other natural disasters – plus homeowners who are seriously disabled. 

Despite a little juggling with the facts, the slick promotion to get this tax measure voted into law, with attractive promises of improved tax exemptions… it did in fact appear to be a legitimate, believable package of property tax relief benefits for residents of the state of California — as long as you ignored the fine print.

What used to be Proposition 60 (voted into law in 1986, the same year Proposition 58 was passed), helped homeowners over 55 to sell their house and move into another home valuated at the same amount or less – in the same county – maintaining a low property tax base… This has been rolled into Proposition 19, and can be taken at face value… as long as the  California State Board of Equalization (BOE) continues to function as a non-political, fact-based source of CA property tax info – which, according to experts and state economists, it does appear to be doing. 

Experts Weight in on Proposition 19

Gaye Chun, the City National Bank wealth planner confirms, telling us: “The idea was to make it easier for seniors to move without worrying about a huge jump in their property tax bill that might be difficult for them to pay.”

Bruce M. Macdonald, an attorney with Carico Macdonald Kil & Benz LLP in El Segundo, CA agrees, stating, “If someone over 55 sold a house for $5 million, but they were paying taxes on a lower assessed value based on their original purchase price, they could buy a new house for $2 million and still pay taxes at their original, lower tax assessment.” No doubt, a truly significant improvement to a tax hike reflecting current or “fair market” property reassessment.

Tax Assessments and Property Tax Breaks in California

Property taxes are typically based on assessed value rather than current fair market value.  In most states, tax assessments are conducted every one to five years and are not changed when a property is sold or transferred as a gift or inheritance.

In California, to everyone’s relief, property tax relief measures have been voted into law to limit tax assessed value of property, as well as capping property tax rates, plus enabling beneficiaries inheriting property from parents to avoid high property tax reassessment – establishing a low property tax base right away, when inheriting a home from parents.

Much has been said about property tax relief on the critical side, by realtors and high net worth business people that benefit from tax increases… However, if you talk to working families, middle class Californians, and even upper middle class homeowners – you will hear nothing but praise for property tax relief laws such as Proposition 13, passed in 1978; and Proposition 58, passed in 1986 – enabling middle class families to avoid CA property reassessment… making tax breaks available to homeowners and beneficiaries such as property tax transfer; with the ability to transfer parents property taxes when inheriting property while keeping a low property tax base; with the right to keep parents property taxes basically forever… inheriting property taxes without issue from Dad or Mom whenever they pass. 

Giving beneficiaries the ability to avoid CA property reassessment through parent to child transfer and a parent-to-child exclusion is a major asset to middle class residents in California; as well as being able to  take advantage of Proposition 19, in conjunction with a loan to an irrevocable trust to buyout siblings’ share of inherited property – keeping a close eye on mistakes to avoid when transferring a property tax base.  Now, the ability to avoid CA property reassessment and other property tax relief  benefits are under serious threat.  

All of  this was planned, launched and protected by Howard Jarvis and his famous  Taxpayers Association, as well as others who joined in the effort beginning in the mid 1970s, when property tax increases were basically out of control… often forcing elderly widows and others living on a fixed income, literally onto the street with their furniture piled up around them on the sidewalk!

Not the way anyone with a conscience would want elderly Californians to end up, in the Autumn of their life – simply to benefit a few real estate firms who will make more money from increased sales (with more homes for sale due to increased inability to pay rising taxes), with the CA Legislature piling up tax revenue higher and higher as property tax revenue increases. Perhaps helpful to a few in the short term… but with dire consequences in the long term for the entire state.

Experts Weigh In on CA Property Tax Relief

“In 1978, California voters approved Prop. 13, a constitutional amendment known as ‘The People’s Initiative to Limit Property Taxation’ that was meant to protect older residents who were unable to keep up with large property tax increases”, Gaye Chun tells us; and adds, “Several propositions since then have tinkered with property taxes.”

Homeowners who plan to transfer their residence to their children now or as part of their inheritance should seek professional advice, so they understand the impact of the new property tax rules”, asserts Bruce Macdonald, the well known attorney in El Segundo.

Current changes in property tax rules could be significant for some families, because it’s not that unusual in California to have a house that was assessed at $150,000 when the parents bought it, to be worth $5 million 40 years later,” Mr. Macdonald, Esq. explains; adding, “When the kids could inherit their parents’ house at the assessed value of $150,000, the property taxes would be approximately $1,500. Now, if the house is assessed at $5 million, that would incur a significantly higher tax bill!”

Experts in California tell us that this points to all the more reason for repealing Proposition 19… as well as adding more concrete protections to keep Proposition 13 safe from anti-property-tax-relief realtors and the politicians that are firmly in their pocket.