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Property Tax Transfer

California Property Tax Transfer

There are, as we all know, numerous reasons that California property owners support Proposition 13 and California Proposition 58.  Proposition 13, passed by voters on June 6, 1978 protects individual consumer and corporate owners of residential and commercial real property from current property tax reassessment, with the exception of completion of new property construction and/or a change in property ownership.  Proposition 58  was approved as a California constitutional amendment by voters on November 6, 1986 – to exclude transfers of real property between parents and children from property tax reassessment.  Moreover, CA trust loans keep parents property taxes low, insuring that an even distribution can be made.

Generally, this gives adult offspring the ability to keep parents property taxes – in other words, to retain a parent’s lower Proposition 13 protected property tax rate. This frequently results in families saving literally thousands of dollars every calendar year. Moreover, these activities open up opportunities for  companies like the Commercial Loan Corporation to help  California beneficiaries and heirs who are middle class, not particularly wealthy, to qualify for Proposition 58 property tax benefits, by providing bridge loans to trusts and probate estates in order for an even distribution to be made for these heirs and beneficiaries. This is precisely how trust loans keep parents property taxes low in California.

Since 1978, Proposition 13 has saved California taxpayers over $528 billion – which has saved every taxpayer in California more than $60,000.  The 1978 Proposition 13 tax shelter finally provided residential and commercial property owners in California with tax relief that has proven, year after year and decade after decade, to be reliable, predictable and secure.

California home owners and renters all enthusiastically support Proposition 13, being able to reliably avoid  property tax reassessment at current tax levels; as well as Proposition 58, with respect to parent to child transfer of property, and parent to child exclusion from property reassessment…  and Proposition 193, involving grandparent to grandchild property transfers, when inheriting property taxes – which has collectively enabled families to comfortably transfer real property from parent to child, and keep parents property taxes, without being reassessed with constant  property tax increases.

Renters in California support Proposition 13, due to the fact that most residential and business renters are aware that as long as their landlord’s property taxes remain low, their rent is likely  not to go up.  Whereas if landlords’ taxes in California go up – we can predict with mathematical certainly that business  rents will follow.  Landlords will more or less have no choice but to increase their tenants’ rents.

Naturally, this would affect stores, gas stations, offices, industrial facilities, and so on – and that would ultimately affect the cost of food, of business goods and services; of gas;  so forth and so on.  Everything would go up.  And consumers would be hit hard.   Which is basically why renters in California support Prop 13, even if they’re not property owners themselves. In fact — why mostly everyone in California with a sense of community and fairness wholeheartedly supports California Proposition 13, 58 and 193.

Avoiding Reassessment of Inherited Property in California

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

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

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

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

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

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

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.

Why Are Trust Loans So Popular With Families Inheriting Property in California?

California Trust Loans

California Trust Loans

Trust Loans Creating a Low CA Property Tax Base for Heirs

Trust loans in California – typically irrevocable trusts – are usually taken advantage of by sibling beneficiaries, with the invaluable help of a reliable trust & estate lender, to find a method of dividing inherited shares of real property held within a trust instrument…

Meanwhile, one or more beneficiaries interested in retaining sole ownership of their inherited property with a low CA property tax base, generally use a trust like this, in conjunction with Proposition 19, to buyout siblings looking to sell their inherited property shares, who get more cash than if they were to sell out through a realtor.

Financing an Estate Buyout Through a Trust Lender

A trust loan is generally viewed as the safest and easiest way to make equalized cash available to each beneficiary selling off their inherited property shares… providing them each with an equal share of the overall total worth of a home being bought out by a beneficiary or beneficiaries looking to retain sole ownership of inherited property… Unfortunately, credit unions and banks are not willing to lend to a trust to help a family in need of funding. However, a trust & estate lender invariably is.

This particular trust financing solution allows a beneficiary to keep a beloved family home, while co-beneficiaries looking to sell off their inherited property shares take their fair share of buyout cash plus an extra $14,000 or $15,000 by not selling through a realtor, given the standard 6% realtor commission and other ancillary fees and charges imposed on sellers in California. It gets expensive!

Embracing an intra-family buyout solution – Proposition 19 and an irrevocable trust loan – beneficiaries selling their inherited property shares end up walking away with that extra cash in their pocket… while the beneficiary or beneficiaries buying out their siblings happily receive their parents low Proposition 13 property tax base; as well as the opportunity to retain sole ownership of their parent’s home. This means everything to some folks – not only for the sake of important family memories, but also for the benefits found in owning a family home that could never be duplicated at anywhere near the original price the parents paid for it two or possibly three generations ago… 

Inheriting a Low Property Tax Base

The unique benefit of inheriting your parents’ low property tax base, unique to California – minimizing property tax  reassessment –   could never be duplicated except for the tax relief provided by Proposition 13, and the Proposition 19 parent-to-child exclusion.

Proposition 13 locks in a base-year value to a home whenever it originally changed ownership, and limits the annual property tax cap to 2% until ownership changes again – or until the realtor community manages to pass another property tax hike.  Which is why time is ripe to become better acquainted with the parent to child property tax transfer, and its’ crucial, subsequent parent-child exclusion from reassessment… As well as new access for homeowners to CA State Board of Equalization & Property Taxpayers’ Bill of Rights.

These are still such invaluable tools to use, when transferring inherited property from parent to child-beneficiary, in order to avoid property reassessment at such dangerously high current tax rates; plus other challenging taxes and obstacles. 

How Do California Families Benefit From an Irrevocable Trust?

Irrevocable Trusts and Parent to Child Property Tax Transfers

Irrevocable Trusts and Parent to Child Property Tax Transfers

Positive Property Tax Relief Changes for California Families

California homeowners over the age of 55 or with severe disabilities (which is still not defined as to what the exact definition of “severe” is) will have the ability to transfer their current property tax assessed value (i.e., “base year value transfer”) of their primary residence to another primary residence anywhere in California.

Therefore, various expanded property tax exclusions have become available to Californians in all 58 counties in the state – to get approved for a base year value transfer. Other new property  tax relief breaks in California include tax relief opportunities  for homeowners badly impacted by wildfire or other natural disasters.

Of course to take advantage of a parent-child exclusion, inheriting property taxes in California through a property tax transfer with the right to keep parents property taxes basically forever… one has to be inheriting a home used as a primary residence by parents, and must move in within a year also as a primary residence. But that’s  hopefully a small price for families to pay to avoid property tax reassessment, to continue inheriting property taxes in California, which otherwise would be financially crippling for most middle class and upper middle class Californians.  

How Do CA Families Take Advantage of an Irrevocable Trust?

Simply stated, an irrevocable trust is a trust that features terms and conditions that can’t be revised. This is quite different than a revocable trust, which permits a grantor to revise a trust, and to take property back whenever one wishes.

However, California families can use an irrevocable trust not only to list beneficiaries for a trustee, but also define assets that are to be inherited, by exactly whom, and what the timeline of each inherited asset is to be… Along with the Proposition 58 originated ability to execute a buyout of inherited property from co-beneficiaries looking to sell – to beneficiaries looking to buy them out…

This usually takes place with the help of an experienced trust & estate lender, such as Commercial Loan Corp in Newport Beach, and most likely a law firm experienced in Proposition 19 and property tax relief matters, such as the well respected and well known firm Cunningham Legal in Pasadena – who can also draft an irrevocable trust, and advise a family in naming an appropriate trustee, who is both honest and committed to the trust agreement and it’s benefit to the family being served.

The family-trustee relationship going forward does not always work out in perfect terms, however these are the noted and generally accepted objectives for both family and trustee.

The Family’s Trustee

As you probably already know, a trustee is required to act in the best interest of the trust beneficiaries and implement inheritance distributions to all trust beneficiaries according to the terms of the trust, whether they get along or not… and they often do not.  But the trustee must understand that he or she is there to serve the beneficiaries and the trust — not themselves.  Many trustees miss that fact, and must be reminded of this repeatedly sometimes, until it sinks in.

All family members work with their trustee to utilize Proposition 19 in concert with an irrevocable trust loan to minimize property reassessment and estate tax, to protect assets from creditors… and to keep under-age or special needs family members far away from legal and/or financial responsibility.

Protecting the Family From Creditors and Tax Hikes

Setting up an irrevocable trust, working with an irrevocable trust lender can help take advantage of the significant estate tax savings this sort of trust provides. An irrevocable trust also furnishes meaningful protection from creditors. As soon as assets and real property transfer to an irrevocable trust, they no longer are property of a grantor – who generally are parents of the grantees, or beneficiaries – and these assets now become legal property of the trustee to hold in safe-keeping to later distribute to the beneficiaries – who are typically family members. 

So future creditors can’t place a lien on assets transferred to the trust because those assets no longer belong to the grantor (often the parent or parents).  Creditors of beneficiaries generally can’t place a lien against trust assets until those assets are distributed to the beneficiaries, often the grown children of the deceased parents. So these trust protections are certainly worth examining carefully and discussing with your attorney, as are all new rules for property tax transfers in California.



Inheriting Your Parents’ California Home with a Low Property Tax Base

Inheriting Your Parents' California Home with a Low Property Tax Base

Inheriting Your Parents’ California Home with a Low Property Tax Base

Let’s face it – Proposition 19 isn’t Proposition 58… However, we can still make use of favorable property tax relief benefits under Prop 19, such as inheriting CA property taxes; as long as we abide by the new rules & regs.  Under California’s Prop 13, the County Assessor’s office is not allowed to increase the appraised value of property except by 2% max. Unless there is a “change in ownership”. Even if the valuation of your home goes up.

Maintaining a Watchful Eye on Your Local County Tax Assessor

As the Albertson & Davidson law firm blog illustrates in an example – “If you bought a house in 1995 for $100,000, but that home is now worth $2,000,000; the county tax assessor is not allowed to value your home at $2 million for real property tax purposes. Instead, the value is limited to $100,000, plus a small percentage equal to the consumer price index or 2%, whichever is less…

….as such, the real property probably has an appraised value of around $125,000. The real property tax is approximately 1% of the property’s appraised value. In this example, the real property tax on a house valued at $125,000 is $1,250. Whereas, the real property tax on a house valued at $2 million is $20,000. Proposition 13 effectively saves the real property owner around $18,750 in tax ($20,000 – $1,250). That’s a huge savings… etc.”

Protecting Your Family From Property Tax Reassessment 

In fact, if the original purchase of your inherited home goes back three or four generations, back to your grandparents, or even great grandparents – the tax hike could crippling. Even for an affluent family with higher than average cash flow.  Sure, if you’re on the 1% list, you can absorb this kind of tax hike… But how many people do you know on that list? Are you on that list?

Probably not, as we’re talking about roughly 1% of the public… maybe 2% to 3% of all homeowners in California. And of course this depends on geographical locale – what neighborhood your home is in. If you’re in Santa Barbara, or Santa Cruz, or San Jose, or in the Hollywood Hills, or in Santa Monica or Beverly Hills… you’re likely to be able to weather that type of tax hit.

It sounds complicated, but in fact it’s actually pretty simple.  When someone passes away, say your parents, and the property is transferred as an inheritance to their grown child-beneficiary, the home retains a low valuation, as long as you avoid triggering property reassessment at “fair market” or current rates, by a “change in ownership”… with the help of an estate attorney and a trust lender – through a parent-to-child exclusion… inheriting CA property taxes from parents; avoiding CA property tax reassessment… and saving your family tens if not hundreds of thousands of dollars, now and in the coming years ahead!

Proposition 13 and Proposition 19 will still enable you to retain your parent’s low original tax rate with a valuation of the property’s original low valuation. However, if you don’t do this correctly, your local friendly local County Tax Assessor will reassess the property forward to its’ current value, and inheriting CA property taxes from your parents, at their low base rate, will no longer be possible. 

Getting Financing & Guidance from a Reliable CA Trust Lender

No matter where you live or what your particulars are… If you’re set on keeping an inherited home from your parents, you have to file a parent-to-child exclusion document. In fact, the best way to make sure you do not trigger property reassessment and run into this sort of financial pit-hole, is to work with a reliable trust lender, specializing in loans to trusts and estates – like Commercial Loan Corporation in Newport Beach, where you can get all the help you’ll need to make sure everything goes properly and smoothly…

So you can safely and securely buyout your siblings; and retain sole ownership of your inherited family home – if indeed that’s what you want to do.  Either way, at least you’ll know what your options are, to keep yourself and your family informed and secure… keeping your  most valuable asset – your home – protected!  This is precisely why eligible California homeowners are moving quickly on new CA property tax relief opportunities

Plus, your trust lender and estate attorney (for good measure) will make sure Proposition 19 works perfectly in conjunction with an irrevocable trust loan to result in minimizing reassessment and establishing a low property tax base. Likewise, most Californians agree, without reservation, that Time is Ripe to Become Better Acquainted With the Parent to Child Property Tax Transfer

The #1 Win-Win Property Tax Solution for CA Families  

Everyone wins with an irrevocable trust loan beneficiary buyout solution… and that’s not just marketing-talk. Your co-beneficiaries will end up selling out to a beneficiary intent on keeping the family home, and walking off with an extra $14,000 to $15,000 as opposed to using a realtor to accomplish the same type of property sale.

Also, if your parents are deceased, and the family home is transferred from a grandparent to a grandchild, then the grandchild can access the same exclusion as the Proposition 19 parent-child exclusion.

If you’re an average middle class or even upper middle class homeowner, and not a member of the 1% high net worth club – you’re probably going to want to take advantage of an exclusion from reassessment.  Plus, you’re going to want to be able to access your right to keep a low property tax base by avoiding property tax reassessment, to be able to transfer parents property taxes with a property tax transfer — to keep parents property taxes through a parent-child transfer… ultimately inheriting property taxes from parents.

However, there are some pitfalls you need to look out for… The parent-child exclusion has to be filed with the County Tax Assessor inside of three years from your decedent parent’s passing. If you miss this critical deadline you’ll be hit with a “supplemental assessment” that will impose a higher property tax hit on you that includes all the years you did not request a parent-to-child exclusion. Again… it’s always that fine print you need to be aware of!

Whatever happens, if you are set to receive house or other real property from your parent, be sure that your parent-to-child exclusion form gets filed properly and on time. If you miss the deadline, and don’t complete this form correctly, the ramifications can be financially crippling. So be careful!