Establishing a Low Property Tax Base ~ Who to Turn to in 2022

It’s always interesting, with respect to estate funding and inheritance financing, how different schools of thought come up with different solutions for saving money on property taxes, for out-of-the-box funding solutions against inheritance assets, and for mortgage capitalization. 

Name brand name lenders, setting the tone  for most lenders in California, such as Quicken Loans, e-Loan,  Wells Fargo and Bank of America – are admittedly all high-end, reliable finance-information and lending sources.  Yet – when it comes to important income tax or property tax matters, or inheritance funding solutions – their editors and writers, talented as they may be, still only nibble around the edges on anything but the most conventional, largely ineffective solutions. 

For example, where tax relief is concerned these firms typically dance around the critical issues associated with property tax exemptions, establishing a low property tax base, or avoiding property tax reassessment – when inheriting a home in any of the  58 counties in California. So who do we turn to for help?

Many property owners embrace basics, and enlist assistance from established property tax experts such as Rachelle Lee-Warner, Esq. — well known Partner, Managing Attorney & Trust Administration / property tax relief expert at Cunningham Legal. Or a reliable trust lender like Commercial Loan Corp, led by inspirational CEO, Kerry Smith in Newport Beach – specializing in irrevocable trust loans, avoiding property tax reassessment and establishing a low  property tax base – for middle class California families… guiding them through while showing them all the new advantages that Proposition 19 offers.  Perhaps not as generous as Proposition 58 might have offered… however, lowering property taxes to a greater degree than you might think.

Avoiding Poor Solutions and Time-Wasters 

With regards to lowering property taxes — these are typical solutions from “expert websites” that homeowners might not want to take very seriously, or avoid completely…

• Limiting your “home improvement” projects;
• Researching nearby neighborhoods for pricing and home values;
• Asking uninformed young attorneys or relatives (to save money) if you qualify for tax exemptions;
• Walking around your neighborhood with your Tax Assessor;
• Checking your tax bill for inaccuracies;
• Getting a second, third and fourth opinion from unproven  Assessors and property tax consultants;
• Meeting with your local Tax Assessor to convince him/her to revise your tax bill;
• Researching and filing a property tax appeal challenge with your County Tax Assessor without a professional property tax appeal firm – on your own, simply to save money.

Checking for inaccuracies, or getting a second opinion isn’t a bad suggestion.  But walking through your house with your local Tax Assessor?  Researching prices around your neighborhood? With all due respect to the financial websites that hand out this kind of advice, these suggestions would be laughable – if they weren’t so serious.  Limiting your home improvement projects – to lower your property taxes? 

Effective Solutions with a Tax Professional or a Trust Lender

We will never be free from property taxes while we own our own home, but one does need to be on the there are a few simple “tricks” you can use to lower your property tax bill, as certain websites claim. 

We can investigate comparable homes in our neighborhood for “discrepancies”. Never making any changes to our property exterior right before a tax assessment, as this can increase the value of our property; hence increase our property tax bill.

Or, we can stroll around our house and chat with our Tax Assessor during our yearly assessment. That makes a lot of sense. Lastly, we can look for local and state exemptions, and, “if all else fails, write up and file a tax appeal to lower our property tax bill”  so suggests a well known financial site.  Listen, if we’re going to file a property tax appeal with a County Tax Assessor, we’d be a lot better off doing it through a professional property tax appeal firm.

If we want to address this issue seriously, and not simple throw silly and unrealistic suggestions out there simply to see what sticks – we have to look at realistic opportunities to take advantage of. 

For example, if we’re an heir of an estate, or a trust beneficiary inheriting a house from our Mom or Dad – and the house is in an irrevocable trust – a loan to an irrevocable trust from a trust lender is likely required if the trust does not contain sufficient cash to make an equal distribution to all of the co- beneficiaries looking to sell off their inherited property shares. This is frequently taken advantage of by beneficiaries, perhaps like yourself, who intend to keep a home inherited from a parent at the original low property tax base.

A loan to an irrevocable trust makes it possible to buyout inherited property shares from co-beneficiaries and greatly speeds up the trust distribution process. A trust loan also saves a great deal of money when you compare selling the family home through a realtor or broker receiving a 6% commission, plus legal fees, and other closing costs.

Inheriting Parents’ Home While Keeping Their Low Property Tax Base

Bottom line, avoiding property tax reassessment  and establishing a low property tax base by transferring property taxes, are property tax relief benefits available to all property owners in California, protected by Proposition 19 & Proposition 13. This should always be taken full advantage of.  You can transfer parents property taxes when inheriting property and inheriting property taxes – and keep parents property taxes basically forever, establishing a low property tax base with Prop 19 benefits as well as taking advantage of a trust loan buyout of property inherited by siblings. Why not?  It’s your right.  Plus, there is no better time than the present to become better acquainted with the parent to child property tax transfer.

This type of property tax transfer is at the foundation of property tax relief for all Californians, generally through a parent to child property tax transfer on an inherited home – usually referred to as a Prop 19 parent-child transfer or parent-to-child exclusion… all the way to a transfer of property between siblings through a loan to an irrevocable trust, in conjunction with Proposition 19 – with an entire year to settle in to an inherited principle residence, or multiple residence (although only one heir is actually required to lock this tax relief benefit in). As long as the parent leaving that property to heirs resided there as a principle residence as well – which is usually the case anyway.      

Using a Trust Loan to Establish a Low Property Tax Base

Buying out sibling property shares while keeping your inherited home at a low Proposition 13 tax base is a popular avenue for many families.  Not only that, if your siblings are receiving funds from an irrevocable trust to sell their inherited property shares, they would receive far less money getting cash from an outside buyer, as opposed to funds from an irrevocable trust. The costs associated with preparing a home for sale, expensive realtor fees, and potential closing costs associated with selling an inherited home can be incredibly expensive.

When a trust loan is used to facilitate a trust distribution, each beneficiary receives an average of an additional $15,000.00 in distribution when compared to selling the home. The person keeping the family home also benefits – saving $6,200+ per year in property tax savings – simply by avoiding property tax reassessment on a nice old inherited home from Mom and/or Dad.

Voters passed CA Proposition 19, just squeaking by with a handful of votes from confused voters in Nov of 2020, and the tax measure became active on April 1, 2021. If you want to intake good advice and avoid mistakes, have property tax experts carefully walk you through Proposition 19, and Proposition 13.

Most middle class and upper middle class California homeowners probably have heard about Proposition 19, the new property tax law that allows seniors and disabled homeowners to keep their current property tax rate when they sell their home and buy a new one. But they may not know how to apply this new law when moving to a new home.

It’s the state’s largest expansion of property tax benefits in decades, basically allowing qualified homeowners to take their Proposition 13 tax base with them anywhere in the state, no matter the price of their new home.

Helping California Middle Class Homeowners Avoid Property Tax Reassessment

Under Prop. 13, tax hikes are capped at 2% a year, meaning the longer you own your home, the lower your property taxes relative to the market value of your home. But some homeowners lose their Proposition 13 tax break when they sell their old home and see their new tax jump to the full market value of their new one.

If you are 55 years or older, a person with a severe disability or a victim of wildfires or natural disasters, you can move to any home in the state, regardless of the home’s price. Your tax is unchanged up to the value of your old home. If your new home costs more than your old one, you pay an additional amount based on the market value over your old home’s price.

When you’re used to a low property tax bill, it can be a shock to your monthly expenses when buying a replacement home includes a huge property tax increase – especially if you have lived in your current home for many years.

Some older middle class homeowners feel trapped because they can’t leave their current home, even if it no longer fits their needs, because they are on a fixed income like Social Security, or a modest pension or military retirement, and can’t afford to move. Taking advantage of Proposition 19 may appear challenging.  But as time passes, more and more tax assessors are providing online links to forms and resources to help homeowners understand how to benefit from these new property tax rules and regulations.