California Property Taxes

An Historical View of Property Tax Relief

A property tax measure entitled “Proposition 13” locked in property tax relief in 1978 that, despite efforts from certain parties to turn the clock backwards for financial reasons, California has managed somehow to maintain for middle class and upper middle class homeowners and beneficiaries inheriting parental property.

This tax relief process, along with Proposition 58 in 1986, providing residents with a means to establish a low property tax base, and to transfer a home from parent to heir with a parent-to-child exclusion from paying current property tax rates…. While keeping a low parental property tax base.

Traditional banking and other lending institutions no longer provide Californians with loans that solve financial requirements for irrevocable trusts, estates, probates, conservators, and other non-traditional inheritors and borrowers. We now must look to Trust Lenders to bridge this financing gap when it pertains to funding trusts, to buyout co-beneficiaries, siblings typically… as well as locking in a Proposition 13 protected low property tax base, with tax rates that cannot exceed 2%.

Property tax breaks like property tax transfers and the parent-to-child exclusion; the right to transfer property taxes that cemented the foundation of Proposition 58 – now in the foundation of Proposition 19…. With some restrictions that, regrettably, many Californians were not fully aware of when they cast their property tax vote in Nov of 2020.

Property Tax Relief – Involving Prop 13 & Prop 19 Trust Loans

The process that makes up the robust foundation of Prop 13 and Proposition 58, now Proposition 19, has managed to survive despite fluctuations and changes throughout 2020 and 2021, enabling funding of a trust or estate to allow equalization of distribution to beneficiaries inheriting property that are looking to sell out their property shares; while those looking to keep inherited property get to establish a low property tax base, and avoid property reassessment.

Your situation may reflect elements sin one or more of the following inheritance scenarios – frequently requiring a non-traditional solution; typically an inheritance funding assignment, or the funding of an irrevocable trust… Trust lenders like Commercial Loan Corp offer a free consultation in which some of the following scenarios and options will most likely be discussed – 

a) Siblings may be going through intra-family conflicts concerning which assessed evaluation of the property in question reflects the “true value of the property”; or confirming which beneficiaries want to keep inherited property, at their parent’s low property tax base – and which siblings insist on selling their property shares to a buyer, at which point it becomes obvious that a buyout from a trust will furnish beneficiaries looking to sell with far more cash than a typical buyer going through a realtor will provide – by avoiding a realtor’s 6% commission, additional fees, legal costs, etc. 

b) Does your family agree there is a need for a loan to an irrevocable trust, or an estate loan. An experienced trust lender is able to fund an intra-family trust that will furnish enough liquidity to equalize funding to all beneficiaries intent on selling off their inherited property shares… while at the same time establishing a low property tax base for heirs that are committed to keeping the family home — avoiding property reassessment in conjunction with Proposition 19.

c) Does your family agree to a specific loan amount required to liquidate an irrevocable trust; to “equalize” buyout cash for beneficiaries within a middle class or upper middle class family that wish to sell off their inherited property shares. Property value and whether or not all the siblings agree on the assessed evaluation, the amount of liquid assets in a trust, as well as the number of siblings set on selling their property shares — influence the liquidity requirements of an irrevocable trust.

d) “Funding equalization” and “cash distribution” should be reviewed during a free consultation – insuring that equalization will result in a sufficient amount of funds being directly distributed to all beneficiaries intent on selling their inherited property shares. Therefore, change of ownership will handled properly and filed to ensure an exclusion from reassessment (i.e., a “parent-to-child exclusion”, often called an “exemption”) – bottom line, making sure that the family can avoid property tax reassessment, keep parents property taxes when inheriting property taxes  becomes a reality.  Property tax transfer, the ability to keep parents property taxes, is still a bottom line property tax relief benefit in California.

The heir or beneficiaries keeping the home pays back the trust loan with personal funds, or with a conventional loan, or through some other means of repaying the irrevocable trust loan.  Keeping the finalization of the process as straight forward as possible. It must appear to be simple, and in a way actually be simple, or residents will shy away from it, if they can’t understand how it works, even in a general way.