Inheriting a Home and Keeping the Property Tax Base

It looks like we’re back again to a proposed “wealth tax” in California. There is certainly nothing wrong with getting rich, and more power to anyone in that position, or with that ambition. However, Californians that are privileged and fortunate enough to have amassed billions or hundreds or tens of millions, really should not be complaining too mightily with any modest “wealth tax” being proposed… As long as the tax is reasonable and doesn’t go too far.

Indiana University law professor David Gamage, who has helped develop wealth tax proposals, said recently, “All around the world you see increasing awareness of growing wealth and income inequalities, combined with growing awareness that our tax system is not up to dealing with this problem.”

As a Pechter Baking company heir, a New York millionaire himself, once said – “Don’t feel too sorry for these folks. They’ll still be eating in the same restaurants!” Supposedly, the wealthiest 1% pay 46% of all state income taxes in California. With the tax cuts that were delivered to the country’s wealthiest families, this number seems unrealistically high.

Nevertheless – if you were the California State Legislature and you decided you needed more cash reserves to pay off  unfunded state government pensions – it would make a lot more sense to take that extra property tax revenue from households with way more cash than they know what to do with – rather than create and implement a middle class property tax hike.  A tax hike, for example, as California is dealing with right now – with voters often not comprehending what the details are all about.

Fast-forwarding into the near future – as soon as middle class beneficiaries are in the position of inheriting a home from a Mom or a Dad, they’ll begin to  understand certain limitations with the existing property tax breaks now in affect – and at the same time will see, usually after consulting with a trust lender, that it is almost always more profitable to sell an inherited home through an irrevocable trust, as a sibling-to-sibling property transfer, than to sell it directly to an outside buyer – collecting the property sale funds from an irrevocable trust that was opened up by co-beneficiaries through a trust lender.  A process we have discussed elsewhere in this blog.

Moreover, despite certain limitations imposed by existing property tax breaks, California still has property tax relief options that beneficiaries and homeowners in other states can only dream about, thanks to still-healthy property tax relief furnished by Prop 13; and Prop 19 – which  is now functioning as an updated Proposition 58 for all intensive purposes.  

To reiterate, it would make more fiscal sense, as well as more common sense, to extract that extra property tax revenue from billionaires and multi-millionaires, than taking it from working families, middle class beneficiaries and homeowners living on $50,000 or $60,000 per year – grappling with an updated Proposition 58, or Proposition 19. The State Legislature and their friends at the CA Realtors Association attempted a   virulent tax hike with a commercial property  tax hike called Proposition 15… but alas that failed to pass.  In the midst of a Pandemic no less – Proposition 15 would have raised taxes on apt building and office building landlords, commercial shopping center owners and store properties being rented out to hundreds of thousands of commercial tenants all across the state…

As we all know, this would have caused commercial and business property owners to increase rents on their residential and business tenants – which would have, in no time at all, forced store merchants and the like to raise prices on all goods and services, to keep up with their higher rent. Moreover, this would most likely have been the beginning of the final unraveling of the 1978 Proposition 13 tax relief package. The door to worse things to come, so to speak, would have been opened, had it passed… and the keepers of the anti property tax relief community would have marched through.  However, it did not pass.

However, property owners should first study up on the property tax breaks protected by Prop 13 and Proposition 58.  Every property owner and heir or beneficiary inheriting property from parents should be fully aware what is involved with the process that trust beneficiaries and probate heirs have access to, working with a trust lender, through a trust loan working in tandem with Proposition 19, to buyout shares of property inherited by co-beneficiaries; plus establishing a low property tax base, in line with Proposition 13 tax breaks – frequently referred to as a beneficiary buyout of sibling property shares, or as realtors call it, “the transfer of property between siblings”, and “sibling-to-sibling property transfer”.

Every homeowner in the United States should know how to buy out beneficiaries’ shares of inherited property; and how a sibling-to-sibling property transfer works; how a loan to an irrevocable trust can help co-beneficiaries get more cash and pay lower taxes than if they were selling their shares of an inherited home to an outside buyer. Everyone who is inheriting property should be familiar with sibling-to-sibling property transfer and how to transfer parents property taxes when inheriting a home, while inheriting property taxes…understanding why the ability to keep parents property taxes, and the right to a property tax transfer under all circumstances, is so crucial to property tax relief in California – namely parent to child transfer and the parent to child exclusion tax break in particular, that must be protected and preserved for the overall good of middle class California.

Only then will beneficiaries and new homeowners fully understand how to keep yearly taxes on property they now own at the low base rate their parents paid, saving thousands of dollars every year, decade after decade.  For those who don’t fully believe all this… they can read up on the facts, at the official Website managed by the CA State Board of Equalization, at or research informative blogs and sites that specialize in property tax relief, in property tax breaks for middle class homeowners – as opposed to the usual tax cuts for millionaires and billionaires.

With some in-depth knowledge of these money-saving tax relief solutions, it’s possible to get the best out of a tax attorney or CPA, property tax consultant and/or tax reduction company, as mentioned above.