The Los Angeles Times, in their inimitable fashion, put it like this on Oct. 19, 2020:
“About 650,000 California homeowners over the last decade received a tax break that allows them to maintain their parents’ low property tax payments when they inherit their homes…
The provision has since been dubbed “the Lebowski loophole” after The Times found that “The Big Lebowski” actor Jeff Bridges and his siblings had advertised a beachfront home in Malibu inherited from their parents for nearly $16,000 a month in rent despite an annual property tax bill that’s a fraction of that amount.
Proposition 19 would eliminate this property tax break for investment homes and commercial properties, meaning that heirs who inherit their parents’ properties would pay taxes based on market value. With some limitations, children who move into homes inherited from their parents would be able to retain the tax break.“
Interesting how the Times gives credence to deceptive wording, while confusing the so-called benefits of Proposition 19. They parse the actual Prop 19 rules and regs, and purpose in fact…twisting the facts to read, “Proposition 19 would eliminate this property tax break for investment homes and commercial properties…” Prop 19 does not now exist to eliminate investment homes and commercial properties. It exists to eliminate the parent to child exclusion, or parent to child exemption… unless you change your life and move into a new inherited home within a year.
Interesting that The Times chooses to leave out the fact that inherited property will be sold off at a loss by inheritors who may not be able to move into inherited property within a year… because middle class homeowners, 95% of the folks affected by this new tax law, won’t be able to afford the new property taxes without the parent to child exemption being utilized within that year one after mom or dad dies.
Instead of telling it like it is The Times tells us, “With some limitations, children who move into homes inherited from their parents would be able to retain the tax break.” Sure, “some limitations” meaning those folks inheriting property must uproot themselves and set up a new life within 12 months, plus sell the home they are living in, or give up their inherited home at a financial loss. And maybe they can’t just up and leave their current residence, sell it, and move to a new home that was owned by their parents, that perhaps does not suit them and their family. For a number of reasons.
Proposition 19 doesn’t exist to eliminate greedy real estate investors… It exists to push middle class home owners out of the way, to force them to sell inherited property if they can’t uproot themselves and move into their inherited home within a year while figuring out a way to sell their own home. In a market hampered by Covid, where maybe it’s not so easy to sell that home they’ve been living in. These are not investment sharks and real estate hustlers, as the Los Angeles Times is falsely hinting at. These are regular middle class home owners.
This new tax law affecting property tax relief in California was put in place to generate more money for realtors and the CA Legislature. Directly impacting consumers. Regular folks, like you and I. Not to eliminate “property tax breaks for investment homes and commercial properties”. That is, we’re sorry to say, a false characterization.
Abruptly, the entire state found out at the last moment, prior to the November vote, that C.A.R. had launched Proposition 19, along with the California Legislature, which passed by a few votes; due mainly to an extremely clever, albeit a bit deceptive, marketing campaign – confusing voters while hiding the fact that Prop 19 exists to kill parent to child exclusion benefits, bit by deceptive bit. Don’t be fooled, completely unraveling the parent-to-child exemption is their eventual goal. Not giving residential and commercial property owners the ability to avoid property tax reassessment every year.
This type of tax break frees property owners from chronic stress based on unpredictable property taxation that is typically high for middle class incomes. This form of property tax relief makes life in general more secure and more affordable for middle class and even upper middle class residents. Rich folks we don’t really need to worry about. They’ll be fine either way. This type of tax relief allows beneficiaries to keep parents property taxes, and of course gives them the ability to transfer parents property taxes when inheriting property; avoiding property tax reassessment, keeping their tax base low through CA Proposition 13.
What is truly incredible to many of us is the ability for a beneficiary in California to use Proposition 58 to get a special loan providing cash to co-beneficiaries through an irrevocable trust, for middle class beneficiaries who want to smooth out cash obstacles (often referred to as “equalizing liquidation”) when it comes to conflicts between siblings who want to sell property versus family members who prefer to keep inherited real property… an invaluable property tax benefit. Which is exactly why it’s so important to understand how and why Prop 19 exists to kill parent to child exclusion benefits at some point in the future… This is the C.A.R. and CA Legislature’s first baby step in that direction.
All states, forever grappling with this Covid crisis, should be heading towards tax breaks for regular middle class people, and not wasting the country’s time with absurd tax law benefiting a few wealthy corporations, a couple of hundred billionaires and multi-millionaires, with huge tax cuts they do not really need; and corporate welfare for immense companies that would be just fine without it. While a couple of hundred million Americans struggle by generally without tax breaks or tax loopholes of any kind to help them put away some extra cash in the bank every year.
In fact, all states need a Proposition 13 and Proposition 58, to help middle class families get by every year. That’s why beneficiaries or heirs in every state who are expecting real property, or are leaving real property to their own heirs, should conduct some careful research on blogs and Websites that focus on inheritance matters, to get more familiar with Proposition 58 and trust loans, on beneficiary issues and CA Proposition 13. They should study informative niche blogs like this one… as well as other niche Websites that cover property taxes in depth… that delve into California Proposition 13, 58 and 193, as well as how trust loans can help beneficiaries.
All resident should learn more about why Prop 19 exists to kill parent to child exclusion benefits, bit by bit; how to keep parents property taxes and how to transfer parents property taxes, inheriting property taxes, or property tax transfer, parent to child transfer and parent to child exclusion – for residential properties of course; however, also for business oriented sites and commercial properties… that take full advantage of Proposition 58 — making use of trust loans to buyout inherited property from siblings, such as simply to get the facts straight on the transfer of property between siblings, how to buy out siblings share of a house; what makes sibling to sibling property transfer work; and how loans to irrevocable trusts help co-beneficiaries get cash while avoiding the necessity to sell their share of the inherited property.
Then, once they get your pitch together, folks in all states can tell their congressional representatives to get moving on passing property tax law for middle class home owners, not just rich folks that live in lovely upscale neighborhoods!
Many of us wonder when it got to this point in this country, when virtually the only way you can have a genuinely comfortable, safe, secure life is if you are fabulously wealthy – and nothing below that or in between.