A Period of Uncertainty and Stress in America

We all know it’s a period of time right now in America of great uncertainty, insecurity and stress… affecting many families, creating enormous tensions, frequently financial…  Even affecting family estates, when a parent passes away; and where ‘will contests’ can be a real problem for families – for example, sibling-A believing she/he should be getting more than sibling-B;  so on and so forth.  We see a lot more of this sort of family conflict lately, over the past few  years, than ever before.

Although we do, thankfully, have solutions in California to prevent such conflicts from descending into disaster. Some of these solutions are tied into getting approved for CA Proposition 58 so heirs can avoid property tax reassessment; as well as classic CA Proposition 13 property tax breaks, for California property owners looking to work around new Proposition 19 property tax obstacles that force homeowners to move into inherited property within one year or lose their “Parent to Child Exclusion”. This can be a stunning loss of property tax relief; unless we meet it head on, and are able to  successfully work around it. 

It seems it’s still possible to take advantage of the property tax transfer benefit from parents, with the ability to keep parents property taxes while avoiding property tax reassessment of course. Despite newly passed obstacles, we can still transfer parents property taxes when inheriting property – bottom line, inheriting parents property taxes at a low base rate the way Proposition 13 was intended!  

Sibling-to-Sibling CA Property Transfer

Firms like Commercial Loan Corp can help solve estate conflicts between beneficiaries; making it possible for us to buyout siblings with a “sibling to sibling property transfer”, siblings who want to sell their inherited property shares, while allowing us to keep the same mutually inherited property from parents – with a trust loan, at that low base rate.  As long as we get approved for Proposition  58, heirs can avoid property tax reassessment, as the California State Board of Equalization explains.  Or possibly at a niche property tax info blog like this one, Property Tax Transfer. 

As long as everyone gets the cash they were expecting with a trust loan, and/or end up with a nice low property tax base… everyone ends up in a win-win happy sibling scenario. As long as the ‘will contest’ can be resolved to some degree, and direct communications between siblings doesn’t completely fall part.

These conflicts have often dominated family structures, so much so that some family groups actually splinter apart… with some family members literally leaving California for ever.  Additionally, Southern California home prices are currently at record levels, which doesn’t help. 

Rising Cost of Real Estate, Property Taxes & Day to Day Living Causing Many Homeowners to Leave California 

Because of hyper expensive home pricing many people are moving from California to nearby states where cheaper real estate can be found, in decent middle class or lower middle class neighborhoods; including Texas, Nevada, Arizona, and in some cases Oregon and Washington, according to Jordan Levine, an economist at the CA Association of Realtors (C.A.R.), who says California residents leave to get out from under general California inflation and an increasingly expensive overall lifestyle that many middle class families simply cannot afford to sustain – in terms of buying a home, feeding a family, maintaining numerous cars and insurance plans, health coverage expenses; schools; you name it. 

It is ironic that C.A.R. (California Association of Realtors) produces a report describing elevated living expenses in the state of California, while they are in fact the chief sponsor supporting the recent Proposition 19 property tax measure, watering down  property tax relief for California home owners… contributing to the higher cost of living in the state… Obstructing the way heirs can avoid property tax reassessment by unraveling the “Parent to Child Exclusion” or Parent-to-Child Exemption, as realtors like to call it.

As a matter of fact, this past August, the median home price in California was up more than 12% from a year earlier, according to CoreLogic/DQNews. Experts say the median home price is being impacted by an increase in luxury homes along with the flexibility of remote working options, which also allows people to move away from places like Los Angeles or San Francisco, to nearby states, in rural areas where families can get more space and amenities for far less cost than in many populated areas in California.

California real estate is often significantly more expensive than other, nearby, states. But then again, so is property in states like New York, or Chicago, in Oregon,  Maryland or Massachusetts. However. At least in California, homeowners and beneficiaries inheriting property have been fortunate enough to have property tax breaks at their disposal since 1978 such as Proposition 13, maintaining a low property tax cap of 1% to 2 % max.

Proposition 19, Trust Loans & Parent to Child Exclusion

Since 1986, Proposition 58 (now Proposition 19) has positively impacted property transfers and naturally property tax transfer, avoiding property tax reassessment on inherited property while inheriting property taxes from parents.  This  has actually saved homeowners in California tens of thousands of dollars over the years.  Hundreds of thousands, literally, over decades.

In fact, thanks to Proposition 19, trust loan based estate funding transactions save beneficiaries $6,000 to $8,000 or more on average, per family, every year.  No, it’s not millions… But for a regular middle class family it is definitely significant.   And if homeowners can’t access this type of benefit, it will hurt them financially year after year.

So even if we can buy a house more cheaply in a relatively inexpensive state like Ohio, or Idaho, South Dakota, North Carolina, or Wisconsin, for example… All comparatively less pricey than average property in many areas in California — we end up spending more anyway every year in property taxes in those other states. So we end up spending more every year anyway.

Property tax transfer, known as a parent to child transfer or parent to child exclusion, will always be low, at 2% or less – if we continue to be able to avoid property tax reassessment.  With new property tax laws in place, if we miss that 12-month deadline to move into inherited property – then we’re right back in the financial vice known as “current market value”…

And, thanks to California politicos who negotiated for us against the Legislature to at least retain enough of Proposition 58 so as long as we do get in under the wire, within that first 12-months after our decedent passes away… with 6-figure trust loan approval, we can, as beneficiaries, buy out co-beneficiaries’ shares of inherited property, which realtors call “sibling to sibling property transfer”, or ”transfer of property between siblings” and end up owning our own property anyway, without the problem of sharing real estate with siblings we’d rather not own property with.

Thankfully, although the timeline has now become more challenging, we can, as California inheritors and homeowners, still take advantage of tax breaks made possible by Proposition 19 and Proposition 13, in concert with an irrevocable trust — and buyout siblings,  so we can take over our own home at a nice low property tax base, more or less equivalent to the tax base enjoyed by our parents. Property tax relief in California may be a bit rocky right now… but it’s still there, if we use it carefully and judiciously.  And keep both eyes on that calendar!