The Right Advice & Tax Plan from a Trust Lender
Much to the relief of Californians who own property and/or are in the process of inheriting a home from a parent, for example, in any of the 58 county across the state, the parent-to-child exclusion from property tax reassessment is still alive and well in all 58 counties, in 2022.
However, quite often, new homeowners and beneficiaries trigger a property tax hike strictly by accident, and end up facing thousands upon thousands of dollars in property taxes from property tax reassessment – that could and should have been avoided, had the right advice and tax plan been in focus.
High property values in California highlight the need for careful property tax planning. If you have owned your property for many years Generally, in terms of property taxes, homeowners who have owned their home for a long time typically have a lower assessed value than current or “fair market” property value tends to be.
As far as parent to child transfers are concerned, when one beneficiary who is inheriting a home decides to buyout property shares inherited by co-beneficiaries (siblings) – to have complete ownership of said property – it’s easy to misstep and mistakenly trigger property tax reassessment.
A parent to child property tax transfer in is line with the effort to avoid property tax reassessment under Proposition 19’s parent-child exclusion, retaining a parent’s Proposition 13 low property tax base. Therefore a loan to an irrevocable trust working in conjunction with Proposition 19 allows us to transfer property between siblings – buying out property from siblings.
Likewise, beneficiaries, upon inheriting property from parents, still have a property tax transfer at their disposal to transfer parents property taxes and keep parents property taxes when inheriting a parental home, and thus inheriting property taxes, but at a low base rate. Hence, the use of a parent-child transfer… enabling the use of the invaluable parent-to-child exclusion – bottom line, helping us avoid any possibility of triggering property tax reassessment!
Choosing the Right Trust Lender, to Keep a Low Property Tax Base While Buying Out Inherited Property From Siblings
We prefer a trust lender who can formulate and deliver the more reliable, simple Proposition 19 rules & regs, in conjunction with an irrevocable trust loan to equalize beneficiary buyouts of inherited property shares.
We have found that any type of unconventional property financing other than irrevocable trust loan funding may run into unpleasant surprises such as property tax reassessment – due to an abrupt change in control, or revised ownership!
LLCs, Corporations, or various Partnership entities owning real estate are subject to a myriad of property tax rules & regs that can change on a dime, often disqualifying beneficiaries from taking full advantage of the parent-to-child exclusion, to maintain a low property tax base, and perhaps buying out inherited property shares from co-beneficiaries – avoiding property tax reassessment and running headlong into pricey financial surprises.
Transferring Your Base Year Value Under Proposition 19
Given new changes to Proposition 19, if you happen to be over age 55, or are severely disabled, you may be able to transfer your home’s current base year value to the purchase of a different home, thereby keeping your property tax payments low. To qualify, you must acquire your new home through a sale transaction. If you acquire any portion of the new property by gift or inheritance, you will not be able to transfer your base year value.