Blog Feed: Property Tax Transfer & Trust Loans – Transferring Property Taxes While Avoiding Property Tax Reassessment

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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.

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!

Can a Trust Receive a Loan in California?

Trust Loans

Trust Loans

Using a Trust Loan to Minimize Property Tax Reassessment

First, what is a trust… and what is the role of a trustee?  Once we understand that, we can move on to look at minimizing property reassessment with a trust, a trust loan, and Proposition 19 tax relief benefits. 

A trust is basically a financial instrument that  allows a company or person to own or hold assets for a collection of people, sometimes a family group – typically known as “trust beneficiaries“, for lack of a better term; managed by a “trustee”.  A trustee can be an individual, or a company. The ability for a trustor to name basically anyone a trustee leaves a lot of flexibility open to the person drafting the trust with a lawyer…

However, this flexibility in choosing a trustee can sometimes be problematic, as many people are named trustee of a trust who know absolutely noting about administering or managing a trust for beneficiaries – being an older sibling, or someone’s nephew or brother-in-law, for example. Trustees often allow the little authority they have been given to harbor ”delusions of grandeur”, especially when it is a high net worth trust.

The trustee can dictate terms to beneficiaries. We frequently see trustees acting as if a trust’s real property, liquid assets, or investment funds belong to them, and not the beneficiary or beneficiaries…. Often treating beneficiaries as if they were working for the trustee when in fact it’s the other way around – a trustee is in fact working for the beneficiaries, and in our view this should be more firmly dictated by the language set forth in trusts by the attorney drafting the trust.

Can All California Beneficiaries Get an Irrevocable Trust Loan?

The answer is basically “yes”… although with some exceptions.  An irrevocable trust can use real estate assets as collateral for a trust loan to a successor trustee or a beneficiary named in a trust.  Naturally it goes without saying that a beneficiary will need approval from a trustee to receive an irrevocable trust loan.

A trust loan can then be applied to an irrevocable trust for a sibling property buyout, to minimize property tax reassessment of real property; plus there can be other assets held in trust, securitized as a trust loan, after the originators of the original trust have passed away, typically making it impossible to change, alter or revise the irrevocable trust in any way.

Trust Loans & Sibling Co-Beneficiaries

Trust loans, irrevocable trust lending, provides a relatively fast solution for sibling beneficiaries looking to retain sole ownership of inherited property – using a trust loan to buyout co-beneficiaries that are seeking a way to cash out, to sell off their inherited property shares.

With Proposition 19 in the mix, there can be a guarantee of minimized property reassessment – avoiding a fair market or current assessment of inherited property; in other words inheriting property while keeping a low property tax base.  Thereby avoiding a steep property tax burden.

In fact, if a home is a product of two or three generations of ownership, triggering fair market property reassessment will unravel an opportunity to minimize property tax reassessment, and this scan be crippling – for many affluent families, and even for some high net worth beneficiaries who might be inheriting very expensive property, but may not have a great deal of liquid assets or outside cash flow coming to them.

What is a “BOE 19-P” California Parent-to-Child Transfer Form?

BOE-19-P  2022 Claim for Reassessment Exclusion: for transfers  between parent & child, plus exclusions for homeowners over 55

Accessing the CA Board of Equalization BOE 19-P Form

Here, we’ll be talking about downloading and reading through the CA State Board of Equalization (BOE) form instructions – found at the end of the BOE 19-P form.  All you have to do to download the form is click on the “BOE 19-P Download” button; and carefully follow the instructions that are laid out in a simple, easy to understand format. 

First of all, make sure your personal data is correct, and well organized… and fill in the BOE 19-P form with the right info; always referring to the instructions on each page…

The instruction pages give you an explanation for:

1. Download all PDF forms to read all instructions.

2. Info required to fill out every section in each form.

3. Filing deadlines for every form – if there is a deadline.

4. Details associated with every section of each BOE form.

5. Details concerning all requirements for every form.
 
Items to Look Out For in the BOE 19-P Form

On November 3, 2020, California voters approved Proposition 19. Besides parent-to-child and grandparent-to-grandchild property tax exclusions becoming active on Feb 16, 2021 – the base year value-of- inherited-property transfer went into affect Apr 1, 2021 – enabling beneficiaries inheriting property from parents to avoid steep property tax reassessment (despite certain limitations).

Californians genuinely liked the idea of significant property tax relief from Proposition 58 being carried over to Proposition 19, including the critical parent-child exclusion from reassessment and other property tax transfer benefits such as the ability to transfer parents property taxes, inheriting property taxes to avoid property tax reassessment…  As well as new, genuinely expanded exclusions for homeowners over 55 – and/or with serious disabilities (folks that are typically ignored or taken advantage of by business people or business organizations holding power).

Eligible California homeowners are moving quickly on new CA property tax relief opportunities.  Seniors and elderly homeowners can now take advantage of genuine, meaningful property tax relief benefits – commonly known as exclusions for homeowners over 55 – along with Californians that have inherited or own a primary residence that has been destroyed or  severely damaged by forest fires or a natural disaster such as flooding from severe storms, or an earthquake. 

As part of the Proposition 19 (formerly Proposition 58) property tax relief measure, certain specific homeowners, coming from other  challenging situations, can now avoid property tax reassessment. The  CA State Board of Equalization  rules and regulations,  in conjunction with the CA Tax Assessors’ Assoc, has created seven new forms to assist County Tax Assessors

CA Board of Equalization stipulations read as follows:

The language of Proposition 19 for both the base year value transfer provisions and the parent-child and grandparent-grandchild exclusion provisions have specified operative dates, as follows:

The parent-child and grandparent-grandchild exclusion provisions become operative on February 16, 2021.

The base year value transfer provisions become operative on April 1, 2021. As part of the Proposition 19 implementation process, the State Board of Equalization (BOE), in consultation with the California Assessors’ Association, has created the following seven new forms to assist County Assessors:

BOE-19-B, Claim for Transfer of Base Year Value to Replacement Primary Residence for Persons at Least Age 55 Years

BOE-19-C, Certification of Value by Assessor for Base Year Value Transfer

BOE-19-D, Claim for Transfer of Base Year Value to Replacement Primary Residence for Severely Disabled Persons

BOE-19-DC, Certificate of Disability

BOE-19-G, Claim for Reassessment Exclusion for Transfer Between Grandparent and Grandchild Occurring on or After February 16, 2021

BOE-19-P, Claim for Reassessment Exclusion for Transfer Between Parent and Child Occurring on or After February 16, 2021

BOE-19-V, Claim for Transfer of Base Year Value to Replacement Primary Residence for Victims of Wildfire or Other Natural Disaster

If we pay close attention to the positive tax relief  benefits  Prop 19 affords us, we can end up in much better shape at the end of the property tax relief process, with regards to our property tax burden;  minimizing or eliminating the dangers of property tax reassessment!

Claim for Reassessment Exclusion

Loans to trusts and Proposition 19

Loans to trusts and Proposition 19

As we all now know, new tax law in California, impacting the parent-to-child exclusion and grandparent-to-grandchild exclusion to legally avoid property tax reassessment, became active 2/06/21.  The “base year value transfer provision” went into affect 4/01/22. The State Board of Equalization (BOE), along with the CA Assessors’ Association, established seven new forms for County Tax Assessors…

Forms to deal with new property tax laws:

1) BOE-19P, Claim for Reassessment Exclusion for Transfer Between Parent and Child Occurring on or After Feb 16, 2021

2) BOE-19G, Claim for Reassessment Exclusion for Transfer Between Grandparent and Grandchild Occurring on or After Feb 16, 2021

3) BOE-19B, Claim for Transfer, Base Year Value to Replacement Primary Residence for Persons at Least Age 55 Years

4) BOE-19C, Certification of Value by Assessor for Base Year Value Transfer
  
5) BOE-19D, Claim for Transfer, Base Year Value to Replacement Primary Residence for Severely Disabled Persons

6) BOE-19DC, Certificate of Disability

7) BOE-19V Claim for Transfer of Base Year Value to Replacement Primary Residence for Victims of Wildfire or Other Natural Disaster

Remaining excluded from property reassessment

The transfer of what lawyers and trust lenders now call a “principal residence” or “primary residence” between a parent and child can be excluded from property reassessment… Meaning reassessment which would increase property taxes significantly – if the fair market value, meaning current valuation, of an inherited “family home” on the date of transfer – is less than the “sum of the factored base year value” plus $1,000,000.

So if the current or “fair market” value of an inherited family home (on the date it’s transferred) goes over the sum of the “factored base year value” plus $1,000,000 – the amount that is over this sum amount will always be added onto the so-called factored base year value.  Unless these new Prop 19 tax laws are repealed. But for now, that is the way things are. 

And with the help of a good trust lender and estate attorney… we can  make good use of the popular Proposition 58 property tax breaks, transferring property taxes in California under Proposition 19; taking full advantage of the useful (albeit now-limited) CA property tax transfer, in order to transfer parents property taxes to legally avoid property tax reassessment when inheriting property taxes through a parent-child transfer or parent to child property tax transfer, otherwise known as a California parent to child exclusion from property tax reassessment – to retain inherited property, and at the same time keep parents property taxes intact.                 

Deadline to Submit Documentation

The form “Claim for Reassessment Exclusion for Transfer Between Parent and Child” which occurred on or after Feb 16, 2021 has to be completed and filed as of 3-years from the purchase or transfer of an inherited property – or before the transfer of that property to a 3rd party. Or whichever is sooner.

So if the claim form hadn’t been completed and filed by or after Feb 16, 2021, it will have to be filed inside of 6-months after the date of mailing of the notice of “supplemental” or “escape assessment” for the property.

If a claim isn’t filed in this manner, the exclusion will be approved but starting with the calendar year in which the claim is filed.  We realize this is a bit daunting, perhaps confusing to some… however your attorney or trust lender will explain exactly how this all works in detail.

Proper Transfree Forms

Also, a “transferee” must complete and file a Claim for Homeowner Property Tax Exemption (BOE‐266) or Claim for Disabled Veteran’s Property Tax Exemption (BOE‐261‐G) within one year from the date of property purchase or transfer.

For transfers that were implemented before Feb 16, 2021, you have to use the Claim for Reassessment Exclusion for Transfer Between Parent and Child form (BOE‐58‐AH).

If you require assistance obtaining a loan to a trust, please complete the following form or call 877-464-1066 to speak to a qualified Trust Loan representative.

California Property Tax Consultants

California Property Tax Consultants

California Property Tax Consultants

As we all know, real estate tax assessments are derived from  the actual value of  the property in question. And the value of assets in total are always a part of the calculation of taxable assets. 

Property Tax Consultants Are Not All Equal

Naturally, property taxes are always in compliance with the tax rates that have been established in the jurisdiction where property is located.  Tax assessments of personal property, such as equipment or vehicles of transport, are typically based on the value of these assets.  Property tax consultants focus mainly on management of property taxes and personal property taxes.

There are different types of property tax consultants.   Some are “valuation consultants” who are seasoned in the art of property appraisal; whose expertise includes dolling out invaluable opinions on company property. 

On the other hand, “strategy consultants” provide various ways to  work with a trust lender when buying out siblings’ property shares through Prop 19 (formerly Prop 58) in concert with an irrevocable trust loan, to reduce property taxes… Providing advice to families on how to keep parents property taxes when beneficiaries are inheriting through a CA property tax transfer – in other words inheriting a home and thus inheriting property taxes without triggering crippling property reassessment. Tax breaks under Proposition 19, left over from the wildly popular Proposition 58 & Prop 193, still enable heirs or beneficiaries to keep a low property tax base through a parent-to-child property tax transfer or parent-to-child exclusion.

Certainly, all property tax consultants provide accurate advice on inheriting through a CA property tax transfer; on compliance matters; and on crucial document filings.  They compile research and data; prep document filings for appropriate jurisdictions;  and take care of negotiations and appeals with County Property Tax Assessors,  plus verify and conclude payments for clients. 

Borrowing from a Trust Lender in Conjunction with Prop 19

We let beneficiaries, clients, know that Proposition 19 tax benefit entitles children of parents leaving them property to preserve the low Proposition 13 maximum 2% tax base. A California property tax transfer.  However, a lot of people don’t fully understand that you have to apply for the benefit. It’s not automatic…

A California Property Tax Consultant also explains how his firm directs clients to a reliable trust lender for funding, in conjunction with Proposition 19 [formerly Proposition 58], with which to be able to buyout siblings  who are looking to sell off their property shares:

We basically introduce the trust lender, for example Commercial Loan Corporation, as a private money lender that loans to irrevocable trusts, that applies for and works in tandem with California Proposition 58… for beneficiaries who are looking to sell their real property shares – for the purpose of facilitating “non pro-rata distribution”… So every heir gets an equal share of the entire overall estate – however, not necessarily of every asset.

Trust Lender Solutions VS Institutional Lending

The Property Tax Consultant continues… If there is a family that goes to a conventional, pricey lender like Wells Fargo for instance – they will always require adult children, beneficiaries that want to sell an inherited property, to ‘go off-title’, and that always triggers present-day tax reassessment. And that spells an expensive 66.66% tax hike!  If the family in question uses the Commercial Loan Corp, cLoanc.com, a company we have been using for years… the loan they provide is to a trust, and not to beneficiaries; so there is no title, and no crippling 66.66% property tax reassessment…

For example, there might be three siblings… beneficiaries – and a house to inherit.  And this is always important to remember.  If you’re one out of the three siblings that wants to keep the inherited house,  you are definitely  looking at a 66.66% property value tax reassessment – if you’re operating without a loan to a trust, or you’re using your own cash; or getting money from a  very pricey institutional lender – typically with multiple restrictions and extremely strict terms…

Using Commercial Loan Corporation…  Their loans to trusts give my clients several invaluable benefits. Their terms can be a lot more flexible than an institutional lender like Wells Fargo or Bank of America.  Also, Commercial Loan Corp is self funded, and that’s basically why they can extend easier terms to clients.

Compliance Issues With Trust Loans Under Prop 19

Compliance for both commercial and residential property owners is far less strict.  Commercial Loan Corp doesn’t charge any fees up-front, that’s another great benefit. Plus, they don’t require paying interest on their trust loan in advance…

…Not only that, there is never a “due-on-sale” clause… that requires the mortgage to be repaid in full when sold; or that all or some of the interest owed must be paid up-front to secure the mortgage. No “alienation clause”… in the event of a property transfer, stating that the borrower has to pay back the mortgage in full before the borrower can transfer the property to another person. There is none of that.

Nothing is simple… However property tax consultants tend to make it look simple; And deliver ahead of schedule, typically under projecting results while in reality usually exceeding expectations.

Property Transfer in California Between Parent and Child

California Parent to Child Property Tax Transfer

California Parent to Child Property Tax Transfer

Ability to Transfer Property Taxes to Children

Let’s say you’re inheriting an aging but beautiful home from your parents, with a terrific pool, and fireplaces everywhere… with a wooden deck the family has conducted so many marvelous surf & turf barbecues on – with that brand new grill, with your favorite smoked hickory-flavored charcoal… And plenty of ice-cold drinks.

Just walking around the backyard near the grill brings back wonderful emotional family memories when you and your siblings inherited the entire property from your parents and – as your lawyers referred to it – the property was “transferred” to a new owner – in this case you…. despite the fact that your siblings are determined to sell out their property shares.  While you are determined to avoid triggering crippling property tax  reassessment!  At all costs.  So you talk to your family lawyer, and call a reliable trust lender to discuss your ability to transfer property taxes to children… Like the well known Commercial Loan Corp in Newport Beach. 

In which case a parent-to-child exclusion is secure, and makes a lot of sense – working with an irrevocable  trust loan, in conjunction with Prop  19, which has basically replaced the Proposition 58 parent-child exclusion. And simply requires a careful, but determined, step-by-step process – to reach the desired outcome – to avoid current property reassessment; while buying out property shares inherited by siblings, and nailing down sole ownership of that wonderful old inherited home with all those lovely old  dreamy family memories!

How to Avoid Triggering Property Tax Reassessment

It’s terribly important to pay attention to good advice from your attorney,   and your trust lender, on mistakes to avoid when transferring a property tax base… In most cases, your inherited property is generally reassessed by your friendly neighborhood CA County Assessors Office; while the new owner pays a higher property tax. The parent-child exclusion was voted into law on Nov 6, 1986… enabling beneficiaries to inherit property from parents, smoothly and quickly – avoiding property tax reassessment and     keeping a low property tax base when inheriting a home.

Thankfully,  new rules for property tax transfers in California  are  still  giving parents the ability to transfer property taxes to children without any issues – and enables a family/parent oriented beneficiary (usually the favorite child!) to  buyout siblings’ share of inherited property and transfer parents’ property taxes through a standard property tax transfer – getting a transfer of property between siblings accomplished without a miserable property tax hike slamming you out of the blue. 

Transferring a Family Home to Beneficiaries

As most of us know by now, given the publicity Proposition 19 has received – at the root  of all this, it’s simply a matter of inheriting property taxes at a profoundly lower rate from parents… with the ability to transfer smoothly from parent to child,  and keep parents property taxes basically forever – for that inherited family home at least. And possibly more, if you have the right lawyer, and the situation  merits it.

In other words, as estate and real property attorneys used to put it, “Avoiding property tax reassessment is why people take advantage of exclusions from tax reassessment under Proposition 58 .” And as they phrase it now, “Avoiding property tax reassessment under Proposition 19 property tax exclusions ”.  C’est la vie.

Skipping a generation, if property transfer is managed from a grandparent to a grandchild, as long as the the beneficiary’s parent is not alive, inheriting or transferring property will thankfully not increase property taxes.

For a free benefit analysis on transferring a property tax base from a parent to a child on an inherited home, you can complete the following form, in just a few minutes….

Trust Loans & Sibling to Sibling Buyouts

Trust Loans

Trust Loans

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

Avoiding reassessment with irrevocable trust liquidity 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What Are the Crucial CA Proposition 19 Property Tax Benefits?

CA Property Tax Benefits, 2022 Onward

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

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

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

Experts Weight in on Proposition 19

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

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

Tax Assessments and Property Tax Breaks in California

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

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

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

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

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

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

Experts Weigh In on CA Property Tax Relief

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

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

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

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

In the Shadow of Howard Jarvis – a New CA Tax Relief Hero Emerges

Stanley R . Apps – Attorney Turned Avid Tax Relief Advocate

Stanley R. Apps is an employment lawyer in California that provides legal counsel to people in the areas of Education, Civil Rights, Juvenile Defense, and Debt Collection Defense.  He represents employees who are wrongfully terminated, subjected to discrimination, or retaliated against by management.   

Mr. Apps is seasoned at fighting for rights to fair treatment and fair pay in the work place… He is experienced at handling cases involving Employment Law; Gender and Disability Discrimination, Disability Accommodations, Retaliation against Whistleblowers and those who report Discrimination.

Stanley Apps Esq. filed Ballot Initiative #21-0032 on October 6, 2021 – a property tax initiative that will allow voters to consider significant changes to California tax policy — this time for an expanded tax exemption for single-family homes paid for by higher taxes on high-valued property of all kinds. Also called The Housing Affordability and Tax Cut Act of 2022filed as a California ballot proposition, without multi-millionaire politician fanfare and media fanfare. 

Mr. Apps, discouraged and frustrated by the deceptive language and disappointing outcomes of CA Proposition 19, put forth this brand new ballot initiative to increase the existing property tax exemption for California homeowners from $7,000 to $200,000.  Moreover,  increasing non property-owning renters’ income tax credit… while establishing a surcharge on residential properties valued at $4 million or more.

Homeowner Tax Exemptions and State Property Tax Revenue

The full title reads: “Increases Homeowners’ Property Tax Exemption and Renters’ Tax Credit. Increases Taxes on High-value Properties. Limits Local Restrictions on Housing Development. Initiative Constitutional Amendment and Statute”.

If this property tax relief measure can increase part of a homeowner’s property value that’s exempt from property taxes from $7,000 to $200,000 – California homeowners will begin to see light at the end of the tunnel.  If even some of this passes, it looks like there will be positive changes in property tax exemptions as well as new rules for property tax transfers in California.

• California residents who are renters will receive an “income tax credit” up to $2,000, adjusted for inflation, as long as their income is not over $400,000 per year.

• Local governments will be reimbursed for any resulting lost revenue with a maximum property tax surcharge of 1.2% – on properties valued over $4 million.

• To pay off an expected $18B in yearly losses, many higher-end properties, valued at $5 million plus, would experience a tax hike — excluding residents of a certain age plus various lower-income properties.  However, as per usual, these items remain vague, in terms of specific details and concrete explanation. 

• Local residents with  “cash flow problems”  will supposedly be protected from being denied “lower cost housing” — again, devoid of factual data-points and specific determinations.  

Economic Affect

The economic imprint of The Housing Affordability and Tax Cut Act of 2022” on California is expected to be significant. Economists anticipate an increase in property taxes on properties worth $4 million and over;  at least $16B to $19B in new tax revenue to the state; plus increased state costs resulting from the increases to the homeowners’ property tax exemption and renters’ tax credit.