Most beneficiaries in California favor a parent to child transfer to avoid property tax reassessment.
As long as a transferred home is, initially, a primary family residence and the offspring receiving gifted or inherited property is moving in as a primary residence, plus an exclusion is claimed inside 12 months from change in ownership… remaining aware of the fact that the first $1,000,000 is not reassessed.
At any rate, despite certain limitations, the financial savings from this process are genuine savings for beneficiaries inheriting property – avoiding property tax reassessment – and for many children of parents leaving a beloved family home to them. This often makes the difference between being able to keep that family home, or losing it – frequently at a financial loss.
Plus, besides trust distribution to co-beneficiaries to keep an inherited home – also being able to take advantage of property tax breaks such as the right to transfer parents property taxes during a property tax transfer, with the legal right to keep parents property taxes basically forever… after inheriting property taxes through a standard parent-child transfer, and parent-to-child exclusion!
We also have to remember that, in 2022 California, a loan to an irrevocable trust, working in conjunction with Proposition 19, allows a beneficiary to buyout inherited property shares from siblings looking to sell their inherited property… thereby speeding up the trust distribution process.
Moreover, an irrevocable trust loan also generates a much higher profit margin for beneficiaries selling their inherited property shares, by avoiding expensive home prepping for a sale, as well as avoiding a costly 6% realtor commission, expensive legal fees, and other pricey closing costs. All in all, avoiding property reassessment, property tax hikes, and higher expenses in general for all concerned.
When a trust loan is used to process trust distribution to co-beneficiaries, on average each beneficiary or sibling gets an additional $15,000 in distribution as opposed to selling the home to a conventional buyer. The family member keeping a family home also saves money – generally $6,500 or more per year in property tax savings by avoiding property tax reassessment on an inherited property.
That’s why many families inheriting a home from parents go to a reliable trust lender to be able to take full advantage of Proposition 19 tax benefits. Beneficiaries and homeowners continue to take advantage of Proposition 19 and Proposition 13 and basic property tax transfers in California and related tax breaks… keeping a low property tax base when inheriting a home – inheriting property taxes at a low rate from parents.
Saving beneficiaries many thousands of dollars, this is often a life-saver – and could, in many ways, be considered a final act of parental affection, from parent to child.