Author Archives: trustandestate

Keeping A Parents Low Property Tax Base on An Inherited Home

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Property Taxes

Property Taxes

Property Taxes in California Are Subject to Change

We all know that nothing stays the same in life.  We know that everything, ever single advantage, and every fortunate upper hand or financial improvement given to us in life eventually changes. 

Naturally, we hope for the better… although it doesn’t always turn out that way. When it comes to taxes, lucky breaks, in a fluid state like California, coming from tax breaks or property tax relief laws… may come around once in awhile – but it doesn’t always stay the same.

For example, what was once the wildly popular parent-to-child property tax break in California called CA Proposition 58 – has now morphed into a property tax relief measure, with some nice advantages for a wider selection of people to avoid property tax reassessment, such as those over age 55, the elderly, folks who are disabled, and homeowners whose home has been damaged or even destroyed by a natural disaster – known to us as “Proposition 19”… active as of Feb 16, 2021.

Experts and Solutions That Can Help

Fortunately, there are professionals around, such as trust lenders, attorneys that specialize in trusts and taxes, specialized CPAs,  and property tax consultants… that can help homeowners like this, as well as beneficiaries inheriting property from parents, all who need help avoiding mistakes or missteps may trigger property tax assessment – which can be financially crippling for middle class and even upper middle class families.

One category of solution providers worth mentioning are property tax specialists that help buyout inherited property from sibling beneficiaries, frequently through an irrevocable trust loan – allowing beneficiaries to retain sole ownership of inherited property that would now cost ten times what it cost 2, 3 or 4 generations ago – plus cutting costs by avoiding property tax reassessment at current, or “fair market” rates.

These property tax experts can show beneficiaries how to keep parents’ property taxes on a property tax transfer; How to take advantage of a parent-child transfer or parent-to-child exclusion (from current tax rates). This helps families inheriting a home to transfer parents’ property taxes along with the home they are receiving… So they also end up inheriting property taxes, not just a home with four walls, a ceiling, maybe a pool, and some furniture.

Guidance From Property Tax Relief Specialists

Some California firms with property tax relief expertise have been encouraged to get creative, to meet new property tax challenges and obstacles with some effective new ideas and solutions. Firms that specialize in base year value transfers and parent-child transfers.

Experts like Commercial Loan Corp in Newport Beach specialize  in irrevocable trust loans, and teaches residents how to save on property taxes and how to locate new access for homeowners to CA State Board of Equalization & Property Taxpayers’ Bill of Rights,  among many other helpful, often critical, tax saving devices and avenues to key information.

This type of trust lender now offers beneficiaries inheriting a home from parents the ability to keep their parents’ low Proposition 13 property tax base; while also taking advantage of Proposition 19 inherited property transfer tax breaks, lowering or pausing CA property taxes… for example transferring your mom’s low property tax base via Prop 19

A Trust Loan / Prop 19 Funding Expert Weighs In

One of only a handful of experts in California, in this area, is irrevocable trust loan and Proposition 19 specialist Tanis Kluever – Senior Proposition 19 Property Tax Specialist at Commercial Loan Corporation (877) 464-1066 https://cloanc.com, who shares her views on these matters…

Tanis tells us: “Many older homes being inherited by beneficiaries in these scenarios are not carrying any debt. Which is fortunate. So let’s say in many of these middle class or even upper middle class families there is a house, maybe some land, and possibly a few valuables…

Here is a typical middle class inherited real estate scenario – let’s say, for example, there are three beneficiaries and no other assets being inherited except an older home. One beneficiary wants to keep the house, to keep parents property taxes; while the other two siblings prefer to get cash from an immediate house sale, probably through a nearby realtor. But – instead of selling to a buyer, here is where Proposition 19 and a trust loan comes into play, providing liquidity and compliance with the Proposition 19 tax system – furnishing the two siblings who prefer to sell, with enough cash liquidity as if they had sold their shares in the inherited property to a buyer…

With a loan to a trust there is the upside of less expense. Frequently, we’re talking about ten times less of an 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 approximately ten times the amount to process the entire scenario, a house sale, with realtor commission and fees, taxes, ancillary costs, etc… “

And no one could express it better.

Equalization Loans to Trusts and Estates

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Equalization Loan for Proposition 19

Equalization Loans for Proposition 19

Equalization Loans

If you recently inherited a home or in the process of inherited home, you are likely interested in taking advantage of the California Proposition 19 ability to avoid property tax reassessment. A property that is a candidate for the parent to child exclusion under Proposition 19 will almost always be held in a trust or an estate. If there is only one beneficiary or all of the child beneficiaries are keeping the property together; the process is fairly simple. If there are multiple child beneficiaries and one or more will not be taking the property as part of the distribution; there are some requirements that must be met if you would like to gain a full exclusion from property tax reassessment. The most important requirements are:

  • The distribution of the assets must be equal for all beneficiaries
  • The will or trust may not have language prohibiting a non-pro-rata distribution (a non-pro-rate distribution permits the administrator or trustee to divide the assets among the beneficiaries using different assets. A pro-rata distribution means each beneficiary receives their entitled percentage of each asset).

Per the California Board of Equalization, in the event there are not enough liquid assets to make an even distribution, the irrevocable trust or estate may obtain an Equalization Loan from a 3rd party to equalize the distribution. Here is an example of how an equalization loan works. For this example the family home is the only asset of the trust or estate and is valued at $600,000. Let’s assume that there are no liens on the property, there are three child beneficiaries, only one child will keep the property and the other two beneficiaries want cash:

The trust or estate would be valued at $600,000
Each beneficiary would be entitled to $200,000 ($600,000 divided by the 3 children)
The trust or estate would obtain an Equalization Loan in the amount of $400,000
Beneficiary 1 would receive $200,000 in cash
Beneficiary 2 would receive $200,000 in cash
Beneficiary 3 (Acquiring Beneficiary) would receive a $600,000 property with a $400,000 loan against it or $200,000 in equity ($600,000 minus $400,000)

This is a simplified example but gives you an idea of how the equalization loan works. The actual calculations may be different when factoring in loan costs and other expenses of the trust or estate. Most lenders are unwilling to lend to an irrevocable trust or an estate involved in probate, so you will need to work with a California lender that specializes in it and helping clients qualify for California Proposition 19 and providing Equalization Loans. If you, a family member or a client is in need of a Proposition 19 Equalization Loan to avoid reassessment on an inherited home, we recommend that you contact Commercial Loan Corporation at  (877) 464-1066 or visit their website at https://cloanc.com.

More information on Proposition 19 can be found at https://proposition19.org/

An overview on California Proposition 19

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What is California Proposition 19

California Proposition 19 is a constitutional amendment that is also known by the name “The Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act”. On November 3, 2020, Proposition 19 was approved by California voters. Proposition 19 provides the ability of those who inherit family properties from keeping the low property tax base providing they use the home as their primary residence.  Additionally Prop 19 allows for homeowners who are over 55 years of age, disabled, or victims of a wildfire or natural disaster to transfer their assessed value of their primary home to a newly purchased primary residence up to three times.

California Proposition 19 went into effect on 2/16/2021 and replaced Proposition 58 and Proposition 193 by limiting parent-and-child transfer and grandparent-to-grandchild transfer exclusions.  Proposition 19 also replaced Proposition 60 and Proposition 90 by expanding senior replacement home transfers which went into effect on 4/1/2021.

If you or a family member is inheriting a home from a parent and are interested in keeping a parents low property tax base and avoid property tax reassessment, you can call (877) 464-1066 for a free benefit analysis.

Avoiding Reassessment of Inherited Property in California

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Avoiding Reassessment of Inherited Property in California

Avoiding Reassessment of Inherited Property in California

The property reassessment solution featuring CA Proposition 19’s parent-child exclusion (or exemption), in conjunction with an irrevocable trust loan, is really quite simple…  It just sounds exotic and complex.  The outcome of this solution is generally similar to a tax rate, for example, that you and your spouse might pay every year, residing in the same house for 40 years – at relatively low property tax rate.  However, if you ignore your CA Prop 19 parent-child exclusion, and your property tax burden is based on a fair market (i.e., current) property tax assessment –  the difference could be crippling to your bank account…

Examining the Process with “Real-Life” Examples

Let’s say you have a fairly large family, with three children; and your attorney drafted an estate plan that divides your assets equally among these three beneficiaries.

If you leave it up to your successors as to how your family property and assets get divided, you might have all three beneficiaries deciding to be sole inheritors of the family home, and reside there as a primary residence. But the more realistic scenario, if you were to look at the statistics, is one beneficiary wanting to retain the family home… with the rest of the siblings insistent on selling off their inherited property shares.  With significant tax consequences. 

However, a family attorney hopefully will have their attention, and point the beneficiary, who wishes to retain the family home, in the direction of a good trust lender, who will open their eyes to Proposition 19 working in conjunction with an irrevocable trust loan – to minimize the property tax reassessment affecting their tax burden with a CA Prop 19 Parent-Child Exclusion.  For the sake of argument, families do have other options to minimize reassessment of inherited property…

As an inheritance without any last minute revisions, beneficiaries that inherit a family home once both parents have passed away  frequently face taxes on that family home that are stepped up” to  current reassessment per each parent’s death.  Beneficiaries caught in this type of tax scenario could be in line to inherit a significant, even devastating,  property tax burden – if they decide to keep that family home.

Under Proposition 19, if the market value of the family home is more than the assessed value plus $1,000,000, property taxes would increase – if beneficiaries retain the family home, and a minimum of one of the beneficiaries moves in as a “primary residence” – property taxes would increase. Of course, if the market value is less than the assessed value, this would not occur.

Structuring Transactions That Won’t Increase Property Taxes

As we mentioned a moment ago, there is a quick list of tools and solutions one can use, depending on the situation, the people involved, and exactly what you’re trying to accomplish…

a) Using the “Legal Entity Exclusion” to avoid reassessment

b) Using the “Domestic Partner Exclusion” to avoid reassessment

c) Using the “Proportional Interest Exclusion” avoid reassessment

d) Using the “Original Transferor Rule” to delay reassessment

e) Using the “Cotenancy Exclusion” at death.  The Cotenancy Exclusion from reassessment allows a transfer from one cotenant to another that takes effect on the death of one transferor cotenant to be excluded from property tax reassessment.

Prop 19 Parent-Child Exclusion & Irrevocable Trust Loan

f) Lastly – the solution we touched on above, which is perhaps the most popular property tax reassessment minimization tool in California – is the property reassessment solution favored by many estate attorneys and trust lenders – taking advantage of the (formerly CA Proposition 58) CA Prop 19 parent-child exclusion – to avoid reassessment.  Despite new limitations and challenges, eligible California homeowners are moving quickly on new CA property tax relief opportunities in 2022

It always makes good sense to work with a first-rate, top-notch trust and  estate lender, specializing in loans to trusts and estates, to minimize or completely avoid property tax reassessment through an irrevocable trust loan in conjunction with Proposition 19; if a beneficiary inheriting property from parents also wishes to buyout siblings inheriting the same home… to retain sole ownership of that home; and is willing to live in that house as a primary residence – and establishes that within 12 months of the death of the remaining parent.  It’s crucial for California beneficiaries, and as a matter of fact all homeowners, to stay in contact with a good estate attorney and a reliable trust & estate lender… to always remain updated on new rules for property tax transfers in California

Many parents want their adult children to retain sole ownership of inherited or gifted property – and assess the original cost of the purchase (the tax basis) along with their inherited home’s assessed value – after Proposition 13 tax breaks, getting them a yearly property tax rate you can live with! The ideas is to look at no or low income taxes due on a typical inherited property transfer.

Fortunately, there is no California estate tax. However, federal taxes are a different matter altogether. If property parents leave to their children exceeds their lifetime gift and estate tax exemption of $12.06 million, they’ll owe a federal estate tax on the portion that exceeds these “thresholds”.

Working With the Right Professionals to Avoid Certain CA Tax Hikes

Estate taxes can climb as high as 40%.  However, working with a good attorney, we can look at tax breaks we could access by being a married couple – shielding oneself from federal taxes. There are other ways one can avoid a possible estate-tax burden simply by working with an experienced tax attorney or CPA.

The best route overall, looking at this from a high level vantage point, is typically to take advantage of all tax relief measures under Proposition 13… while carefully establishing an accurate assessed value of one’s inherited home, if that’s the scenario – plus establishing a step-up in basis upon the death of one’s parents.

The key is having excellent inheritance or property counsel and tax advisors to work with all the way down the line. Trying to escape taxes by yourself, just to avoid spending a few dollars, is definitely penny wise and pound foolish.

Trust Loans

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Trust Loans

Trust Loans

Trust Loans and Proposition 19 In California

A trust loan in California is an inheritance loan typically planned  and implemented by a licensed trust & estate lender, or a private money lender.

Conventional lenders like banks and credit unions won’t extend a complex lending instrument (like a trust loan working with Prop 19) to borrowers, who are generally beneficiaries to a family trust, whose names never appear on the property title, making the loan even more complicated to the likes of banks and credit unions in the state of California.

a)  For one, the trust that a loan is issued to should be an irrevocable trust…

b)  An irrevocable trust has to permit the trust’s beneficiary, or beneficiaries, or trustee – to accept a loan associated with property and in fact be owned by the trust as collateral.

c)  Secondly, the trust should also allow beneficiaries selling out their inherited property to accept the trust money as buyout funds…

d)  Thirdly, the trust must position the trustee to function mainly for the benefit of the beneficiaries…

e)  Moreover, with the authority to borrow against the trust as security for the loan.

f)  A California beneficiary property buyout is generally executed within seven to ten days, with a trust loan working with Proposition 19. That being said, a trust loan and trust lender will work around the needs of the trust, executor, trust administrator or attorney.

g)  Once beneficiaries selling off their inherited property shares have received their trust loan funds, the title of the property can be transferred to the beneficiary buying the property from the iron-clad irrevocable trust.

h)  Finally, the property-owning beneficiary having bought out his or her co-beneficiaries, can now get approved for a conventional  loan to refinance an irrevocable trust loan.

An Irrevocable Trust Loan Beneficiary Buyout

In California, trust loans are generally used to implement a beneficiary property buyout, to equalize buyout cash for each and every beneficiary selling their inherited property shares – working in conjunction with Proposition 19 to insure the beneficiary buying out co-beneficiaries get to minimize property tax reassessment, keeping a low property tax base when inheriting a home; since a trust loan is viewed as a third-party loan; and can pay for all the expenses of the trust, the trustee’s fees, and even pay for the trust estate’s attorney fees.

Why Borrow With An Irrevocable Family Trust Loan

An irrevocable family trust loan makes it possible for a trustee to get a mortgage secured by real property held by a family trust.

Borrowing money from a family trust like this lets a trustee or beneficiary equalize funds among beneficiaries selling-out their inherited property… while implementing a simple property buyout typically of sibling beneficiary property shares – dividing ownership in the inherited property; and receiving enough funds to resolve most family trust obligations. Californians, by now, are very aware of new CA property tax relief transferring low property tax values.

A family trust loan is made directly to the trust. Usually, the trustee or one of the beneficiaries is responsible for paying off the trust loan, and making sure the family trust mortgage is paid off as well.

If you are in need of a trust loan or loan to an irrevocable trust, contact Commercial Loan Corporation at (877)464-1066. They can provide you with a free benefit assessment and will be able to let you know how much you may be able to save in property taxes by utilizing a trust loan to buyout siblings and keep a parents low property tax base on an inherited home.

Parent-to-Child Property Tax Transfers Under Prop 19

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California Parent to Child Property Tax Transfer

California Parent to Child Property Tax Transfer

CA Proposition 19 Tax Relief & Exclusion From Reassessment

As of Feb 16 in 2021, Proposition 19 changed everything. Despite some revisions to California’s primary property tax relief system impacting beneficiaries inheriting property, and homeowners, affecting future inheritance property tax breaks.

Homeowners over 55, with physical disabilities, or whose home has been destroyed or seriously damaged by forest fire or other natural disasters – can now take advantage of significant exclusion from reassessment for property transfers… or “exemptions” from the affect of steep property reassessment under Proposition 19 property tax relief.

Prop 19 allows transfers of a family home, or a family farm, between parents and their children, or grandparents and their grandchildren, without causing “a change in ownership” which would unravel tax benefits such as exclusion from reassessment for property transfers, and trigger crippling property tax reassessment.  Fortunately, we can still avoid “change of ownership” which would cause a steep property tax burden to descend on beneficiaries.     

Parent-Child California Property Transfers

Let’s make sure we understand that this isn’t some sort of automatic overnight property tax relief solution. There are certain qualifications that must be met. Every beneficiary has to be found to be “eligible” for a homeowners’ exclusion or a disabled veterans’ exemption – and applied for no longer than twelve months after the transfer of property or the purchase of the property in question.

To reiterate, before any inherited property transfer, parents must prove they have been primary residents of the property being transferred or inherited;  and at least one child/beneficiary will show that there is one or more  primary residents living in that property inside of twelve months after the intra-family property transfer.  

Similarly, a parent must also be eligible for the homeowners’ or disabled veterans’ exemption within one year of transfer or purchase.  The purchase or transfer of “a family home” between parents and their children (beneficiaries) can be qualified for exclusion from reassessment if and only if the property in question is continually lived in as “the family home” of the transferee.

Moreover, at least one of the children-beneficiaries involved has to show that they are residing full time in their inherited home as “a primary residence” – as opposed to renting it out to others as a vacation home, or using it as a weekend swelling, for instance.

The BOE & Property Tax Exclusion From Reassessment

The BOE, CA State Board of Equalization, tells us that if a parent or their principle beneficiary/child did not get final approval for their property tax exclusion (or “exemption”) inside a year, but was actually eligible – they can apply for an exclusion by showing that their inherited home is indeed their primary residence.

To qualify, the assessed value of the home upon purchase or transfer has to go through a valuation examination. Any Tax Assessor’s Office provides a digital “calculator” to help homeowners estimate potential tax savings. 

The value limit is equal to the home’s taxable value at time of transfer plus $1,000,000.  Any amount at market value that goes over the limit is added to the taxable value for the transferee.  Partial tax relief is allowed to mitigate the tax burden…  under the parent-to-child exclusion up to the value limit; with the remainder assessed at the current, up to date, market value.

A tax relief exclusion from reassessment for transfers between grandparents and their grandchildren follow the same rules and regulations as the standard parent-to-child exclusion… providing the parents of any grandchildren have passed away. Moreover, special rules apply to multi-unit residential residences and mobile homes.

At the same time, beneficiaries inheriting a home from parents, as well as homeowners, must continue to watch for any changes to their ability to maintain a low tax rate, inheriting property taxes, from a parent to child transfer, and to steer clear from triggering steep reassessment of inherited property – thereby avoiding property reassessment through a parent-child transfer and a parent-to-child exclusion… still intact, thankfully, despite all these new rules for property tax transfers in California – but still must be watched carefully at all times.

Californians’ property tax breaks, their right to transfer parents’ property taxes and to keep their parents’  property taxes basically forever, with a property tax transfer, has to be watched incessantly by non profit watchdog organizations, such as Howard Jarvis’ California Taxpayers Association, http://www.caltax.org, or http://www.ftb.ca.gov  

San Joaquin County Bar Assoc. Offers Perspective on Prop 19

“On paper, Prop 19 seems confusing, so a practical example might help: Mary owns her primary residence, which is worth $1 million and assessed at $300,000. Mary also owns a rental property worth $900,000 and assessed at $200,000. Mary has one child, John, to whom she will leave both properties.

Before Prop 19, John could inherit both properties and continue to pay the same property taxes Mary would have via the parent-child exclusion.  After Prop 19, if John inherits the rental property, it will be reassessed at fair market value because it was not Mary’s primary residence. If John inherited Mary’s primary residence and chose not to use it as his primary residence, it would also be reassessed at fair market value.

But if John chose to use it as his primary residence, there would not be a reassessment, as the difference between a primary residence’s fair market value ($1 million) and assessed value ($300,000) is less than $1 million. 

However, assuming that the fair market value of a primary residence is $1.5 million, instead of $1 million, with the same assessed value of $300,000. In that case, the property would be reassessed, since the fair market value ($1.5 million) is greater than $1 million more than the assessed value ($300,000) – but there would be a $1 million exclusion from assessment, so the residence would be reassessed at $500,000 ($1.5 million – $1 million).

This information is intended to provide a general summary of Proposition 19. It is not intended to be a legal interpretation or official guidance. Our advice is subject to change. So we encourage you to consult an attorney for advice on your specific situation.”

We could not have described and illustrated it better ourselves.

Assistance with transferring a property tax base on an inherited home

If you require assistance transferring a property tax base from a parent to a child on an inherited home, we suggest you call Commercial Loan Corporation at (877)464-1066 or visit their website at cloanc.com. Even if you do not require a loan to an irrevocable trust to make an equal distribution, they can help answer questions you may have and put you in contact with a Trust & Estate Attorney in your area if needed.

Homeowners Make the Best of New Property Tax Measures in California

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Property Tax News

Property Tax News

In Nov 2020 voters in California were presented with a new property tax measure… Proposition 19.  So in addition to a Prop 19 parent child exclusion, a mission was apparently added to help fire-fighters; providing seniors and disabled homeowners with property tax breaks,  along with folks over 55 who have suffered property damage from a natural disaster such as flooding, or an earthquake.

Californians Still Have Property Tax Relief to Turn To

Despite several limitations, parents in California can still transfer property they own to beneficiaries, with parent’s low property tax base since the parent-child transfer provides grown children with an exclusive property tax break that provides exclusion from property reassessment – thereby avoiding or minimizing property tax reassessment.

This also applies to grandparent to grandchild beneficiary transfers… However, necessitating that both parents of the beneficiaries must be deceased to qualify the grandparent-to-grandchild exclusion, or exemption.

Under new property tax requirements under Proposition 19, a parent must have lived in the residence being transferred, usually via inheritance to beneficiaries… as a primary residence. And must have filed a “homestead exemption” for the inherited property going to their beneficiaries.

An inherited home can be valued up to $1,000,0000; with the beneficiary prepared to move into the home within one year as a primary residence; plus claim a homeowners’ exemption – in order for the property transfer to be excluded from property tax reassessment.

Prop 19 Favors Seniors, and Folks with Bad Luck or Poor Health

Under Proposition 19 homeowners age 55 and up, severely disabled, or victims of wildfire or a natural disaster, can buy a new primary residence anywhere in California up to three times, and transfer their lower property tax basis from their existing property to their new property. The new property has to be of equal or lower value of the original property being sold.

This is all in addition to, not replacing, the old Proposition 58 property tax benefits that provide Californians with the ability to avoid a sibling to sibling buyout directly, while still being able to buyout siblings and retain sole ownership of inherited property… all the while managing to  avoid property reassessment with a parent-child transfer… with the right to keep parents property taxes (low property taxes) through a Prop 19 parent child exclusion in California.  A property tax transfer is still accessible for all Californians inheriting property from parents, while at the same time inheriting property taxes.  In other words, inheriting property while keeping a low property tax base

Even though a Prop 19 parent child exclusion is subject to certain new limitations… as long as one stays in compliance — the property tax breaks are there to take advantage of. Which is why many beneficiaries work with a trust lender to buyout co-beneficiaries,  retaining sole ownership of inherited property along with minimizing their property tax reassessment…. Moreover, so beneficiary property disputes can be resolved by a loan to a trust.

Estate Taxes

On the other hand, if a beneficiary sold his or her inherited property after the date of parental death, capital gains tax would be low, if any.  The estate tax for 2021 was capped at $11.7 million… Estates valued at less than $12.06 million in 2022 for individuals are exempt from an estate tax.

Every property owner in California resident is allowed to gift a certain amount of property per year, tax-free.  In 2021, this amount was $15,000, and in 2022 this amount is $16,000. There is a good chance estate taxes will not be imposed, looking ahead… unless the estate tax cap is revised… And that’s highly unlikely in the foreseeable future.

Loans to Trusts

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Loans to Trusts

Loans to Trusts

Trust Loans & Prop 19: Minimize Property Tax Reassessment

As you probably know, a trust in California generally reflects a financial instrument, frequently associated with a family estate, usually created with an estate attorney — and if it’s an irrevocable trust, usually with a trust lender involved — where a “trustor” (the person who created the trust agreement) entitled someone with the authority to manage the trust, called a “trustee”… also able to hold title to property or assets for the benefit of any and all beneficiaries to the trust.

Besides the fact that trusts are known to be a financial instrument good for deferring or lowering income taxes and property taxes… a trust often allows a company or a person to own assets that belong to a group of people that would be called beneficiaries, a family that would officially be known as beneficiaries to the trust… or even just one person, that would be known as “the beneficiary to the trust”.

However, frequently much to the chagrin of the beneficiaries – a trust is always managed and controlled by a trustee, which can be a person or a company. Including the distribution of liquid assets, if there are liquid assets, to the beneficiaries. Often a source of contest or dispute between trustee and beneficiary, or beneficiary vs. beneficiary.

Trust Loans for Sibling Beneficiaries

Trust loans are often utilized by sibling beneficiaries who want to minimize property tax reassessment, buying out an inherited home from siblings who are looking to sell off their inherited property – generally to establish and retain sole ownership of an inherited home.

Here is where an irrevocable trust loan often steps in to resolve these differences in objectives with their inherited property shares. The solution involves a fast trust loan to fund a beneficiary property buyout – plus usually works in conjunction with Proposition 19 to help minimize property tax reassessment or completely negate property reassessment – saving inheritors thousands of dollars in the final analysis. Californians need to keep a close eye on these new rules and regs just as they must keep up with new rules for property tax transfers in California.

Moreover, using this property inheritance solution, the sibling beneficiaries selling out their inherited property shares end up, in seven to ten days usually, with at least an extra $14,000 or $15,000 in their pocket, as opposed to selling off their inherited property through a realtor, given the standard 6% property sales commission and other ancillary fees and charges.

It adds up. There’s no free lunch, working with a realtor. No matter how convincing the sales pitch is.  It’s certainly worth exploring other options.

If you are in need of a lost to a trust or irrevocable trust, we highly recommend that you call Commercial Loan Corporation at 877-464-1066. The are California’s #1 Trust & Estate lender and can provide you with a free cost benefit analysis on trust loan and parent to child transfer.

Why California Families Inheriting Property Should Consider Borrowing Against An Irrevocable Trust

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Trusts

Trusts and Estates

Family Trust Debt Relief, After Mom and Dad Are Gone

Life in the 2020’s in California, and the United States in general, for middle class and even affluent families, is never all smooth and easy. There are always problems to deal with, legal or economic issues… family relationship disputes, or business conflicts people bring home with them, that often causes rifts between family members…

When a parent leaving property and assets to children passes away, they still, frequently, owe expenses, they often owe money to creditors, if they were elderly prior to passing away parents frequently leave this earth owing medical fees, sometimes legal fees to their family attorney, possibly hospital and lab test expenses, even mortgage payments, and more and more frequently these days – property taxes. There might also be debts owed to other beneficiaries of the trust they are leaving behind for their heirs.

When parents leave a trust behind for their children, who now become beneficiary siblings, there is frequently not enough liquidity in the family trust estate to make pay all these debts. Getting approved for a trust loan by a trust & estate lender like, for example, Commercial Loan Corp in Newport Beach, can produce the required cash to help resolve those kinds of family debts.

Buying Out Co-Beneficiary Siblings In California

As is often the case, parents leave a home to their children, which couldn’t be purchased and duplicated in today’s market for even close to what Mom and Dad pad for it a generation ago, or what Grandma and Grandpa paid for it two generations ago.

Yet there are always more sibling beneficiaries wanting to sell off their inherited property shares after Mom and Dad pass on, than there are beneficiaries or, more likely, one beneficiary who insists on not selling out and keeping Mom and Dad’s home… the family home.

Quite often, needless to say, serious disputes may arise between siblings over a contentious lack of agreement like this, whether to sell or to retain, a family home, where so much is at stake.

Frankly, these family conflicts sometime grow so out of control that family members aren’t even able to agree on the valuated price they believe their family home to be worth! So disputes can grow even more heated and convoluted stemming from an issue like that.

Avoiding Property Tax Reassessment In All 58 CA Counties

This is where an irrevocable trust, working in conjunction with Proposition 19 (formerly Proposition 58) can make it possible for you to take advantage of a parent-to-child exclusion from current property tax reassessment… and thereby actually avoid property reassessment at present day tax rates. Saving your family from a crippling tax hike. Finally, thanks to Proposition 19, property tax exclusions can  be utilized in all 58 counties in California.

Even affluent families would feel the bite of a tax hike like this, going back two, even three generations’ worth of reassessment imposed by the County Tax Assessor, and possibly suffer serious financial impact.

A Win-Win Family Property Solution For CA Beneficiaries

All of these financial issues can obviously cause a great deal of strife and stress among family members… However, with a wise attorney around to extend sound advice, a win-win financial solution can be implemented for homeowners… and certainly for beneficiaries inheriting property from parents, who either want to sell off their inherited property shares, or who wish to buyout siblings and minimize property reassessment — keeping a low property tax base when inheriting a home.

Frequently, this shows up in the form of an irrevocable trust,  which, working in concert with Proposition 19, will provide a buyout solution where a sibling beneficiary insisting on keeping a family home can buyout siblings looking to sell their inherited property shares, and, at the same time, can certainly minimize property reassessment, through a parent-child exclusion.  In fact, these days, most eligible California homeowners are moving quickly on  new CA property tax relief opportunities — to avoid triggering property reassessment.

Most Californians can avoid property tax reassessment, if they remain alert, with the right to a property tax transfer, to transfer parents property taxes and keep parents property taxes basically forever, upon inheriting property taxes from Mom or Dad with a parent-child transfer, with the help of an estate & trust lender… and possibly an estate attorney specializing in property tax relief, both who can help a family minimize reassessment rapidly and without any issues, if they correctly use Prop 19 property tax breaks.

Plus, siblings selling out their shares will end up with an extra $14,000 or $15,000 in their pocket, as opposed to doing the sale though a realtors, being impacted by their standard 6% realtor commission… and who knows what other fees and ancillary charges also being imposed on them as well. Peace and quiet will descend on the family… with every sibling getting what the want, in a genuine win-win family transaction… Not lip-service, mind you – but the real thing!



Resolving a Family Dispute Over Inherited Property – Keeping or Selling – With a Trust Loan, in Conjunction With Prop 19

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New Benefits Provided to Families by Proposition 19

Unlike prior years, Proposition 19 now gives every CA homeowner an exclusion from reassessment; available in every county – in other words, 100% statewide. This particular change now enables California residents to purchase a more expensive home, in any county, rather than a more inexpensive home to keep the tax relief benefits of the base year transfer.

If a more expensive primary residence is purchased, there is now a rather complex formula to minimize base year value. Moreover, Proposition 19 now increases the number of times an exclusion from reassessment, or rather certain exclusions,  may be used by homeowners over age 55, up to three times in a lifetime.

Generally this option revolves around a common family or sibling conflict that typically has beneficiaries insisting on selling their inherited property shares strictly for as much cash as they get – which they finally realize their co-beneficiary sibling buying them out can provide, dispensing with a realtor’s 6% commission, closing costs, legal costs, and processing fees. plus all sorts of annoying, ancillary charges.

While the beneficiary buying them all out gets to retain the family home, generally with the help of an estate & trust lender, and often with an estate attorney watching over their shoulder, it becomes obvious tight away to all concerned that this trust loan / Prop 19 buyout solution furnishes a win-win formula for everyone. The trust lender funds the trust and provides “equalized distribution” so every sibling who is selling their shares receives an equal amount.

Paying Trust Expenses

For beneficiaries, when a trustee passes away, there is often not enough cash or “liquidity” in an estate or in a trust to pay debts an initial trustee owed, such as attorney fees, medical bills, mortgage and personal loan debt, and other financial obligations. A trust loan can help resolve these debts.

Helping Families Avoid Property Tax Reassessment

Many attorneys as well as trust lenders truly believe that a loan to an irrevocable trust is the safest, most secure and most beneficial option available to beneficiaries – to keep their inherited home at a low base rate, or walk off with a good deal of cash from selling their property shares.   Depending on which way they chose to go.
One or more family members, beneficiaries, retaining an inherited family home, buying out siblings that want to sell their inherited property, discover quickly enough that this is a viable option. But the siblings who want to keep their family home have to take great pains to avoid triggering reassessment.

Even with a parent-child transfer, using a parent-to-child exclusion (from property reassessment) – when inheriting property while keeping a low property tax base – how do you know for sure you’re not paying more property tax than you should be paying? 

New homeowners have to consult with their attorney and trust lender, or CPA, to make sure they are taking the correct steps right from the beginning of the buyout process, to retain the low property tax base their parents had, thanks to CA Proposition 13, avoiding fair market (i.e., current) property tax reassessment.  It’s a good thing there is new access for homeowners to “CA State Board of Equalization” & “Property Taxpayers’ Bill of Rights”

Without loans to irrevocable trusts, this type of property transfer would be seen as a sibling-to-sibling transfer and would trigger current property reassessment, the outcome being a huge tax hike! Beneficiaries keeping an inherited home through this sort of solution ends up saving on average $6,200 in yearly property taxes.

Borrowing against an irrevocable trust ensures that the process moves directly through the estate and locks in a low property tax rate – with the ability to keep parents property taxes, keeping property at a low base rate through the parent-child transfer and parent-to-child exclusion.