How Has Prop 19 Changed Inheriting California Property and Home Ownership?

How Has Prop 19 Changed Inheriting California Property and Home Ownership?

How Has Prop 19 Changed Inheriting California Property and Home Ownership?

Proposition 19’s supporters would like to reduce Prop 13’s less attractive elements and implement what they would call, “freeing-up long-term homeowners.” 

Prop 19 is expected to generate increased house sales, as well as realtor and broker commissions, which is why Prop 19’s largest supporter, the California Realtors Association spent $40,400,341 to get Prop 19 passed, and the National Association of Realtors kicked in $4,800,000 to promote such a hard-to-sell property tax measure.  The $100,000 donated by the California Professional Firefighters union to Proposition 19 pales in comparison.

Proposition 13, which passed in a landslide way back in 1978, was a unique amendment to the California Constitution which capped residential property taxes on a primary residence to 1970s levels, capping them at 1% of assessed value (plus local additions, by county).  Assessments were allowed to rise at a maximum rate of 2% per year — even though prices on real estate in California continued to increase in most of the state’s 58 counties.

Properties would be reassessed at current market rates when a total change of ownership occurred, either by death, gift, or sale — when the property in question is “transferred”.  What the CA State Board of Equalization calls a “change in ownership.”  Deceptively simple terminology for a rather complex process; made even more complex these days by varying state taxes and Coronavirus issues, verified at property tax relief websites and niche blogs like Property Tax News or Loan To A Trust.

 Inheriting California real estate and home ownership in general is different now as far as property taxes are concerned.  If a homeowner in any county bought a $2,000,000 home today, without any property tax breaks, they might pay roughly $25,000+ per year in property taxes.  A family in a nearby $2,000,000 home that’s been there for let’s say 30 years may owe merely $2,500 per year.  But it’s all relative.  Certain politicians complain about this type of inequity… however  if you bought property 30 years ago, would the same property cost the same last week?  Of course not.  So why should taxes be any different.  

Under Proposition 19, the only low Proposition 13 tax base that can be transferred to your children is that of your principal residence to your heirs (offspring).  Subsequently,  your heirs have to reside in that home also as   their primary residence.  And if that inherited home is valued at more than $1,000,000 it may be partly or completely reassessed by the local  tax  assessor, with a partial or total loss of their Proposition 13 parent-to-child exclusion property tax break.  It is not entirely clear yet how all of this will shake out once the dust settles on this. 

However the entire concept of installing a property tax hike in the midst of a flagging Pandemic economy with growing unemployment and under-employment; or even the decision by the Legislature to  promote a Proposition 19 tax hike in 2021 — to water down middle class homeowners’ ability to avoid property tax reassessment is under a spotlight and being seriously questioned in light of basic survival, and even retirement, by respected economists, academics and analytical websites.   

In most cases, Proposition 19 will effectively eliminate a parent’s right to transfer a low property tax assessment to heirs, since it is unclear at this point how  many heirs or beneficiaries inheriting their parents’ home will be all that excited about  moving into that inherited home as a primary residence — and within 12 months at that. It may be too small for a large family.  Work places may be too far away to be convenient.  School districts could b e a major issue.  And so on. 

Moreover,  many homes are worth far more than $1,000,000 in California. That makes Proposition 19, despite it’s many positive benefits, a liability for many inheritors… with challenging  outcomes for certain taxpaying residents who have inherited California real estate.

The folks who benefit from Proposition 19 are embraced clearly in its’ promotional title: “Home Protection for Seniors, Severely Disabled and Victims of Wildfire or Natural Disasters Act.”  Exactly what the definition and application of  “severely disabled” is, remains to be seen.  As mostly everything with this particular Legislature, it would be safe to say that there are a lot more assumptions in play here than specific, concrete projections that are backed up by well researched data and factual analysis. 

We can assume that homeowners who are over the age of 55, disabled or supposedly “severely” disabled, who have been harmed by a forest fire or  some other natural disaster of some kind,  will be able to transfer the assessed value of their primary California residence to a new home anywhere within the state’s 58 counties. 

This revised property tax relief procedure may be repeated  three times in a lifetime, supposedly, and so homeowners now have two years to transfer their Prop 13 low property tax base.  And one can still expect (with more limitations now built into the process) to be able to take advantage of trust lenders with a loan to a trust if the goal is to buyout co-beneficiaries (i.e., siblings) looking to sell their inherited property shares, as a transfer of property between siblings, with a loan to an irrevocable trust. 

So no matter what, at least for the moment, Californians can still make good use of a property tax transfer from a parent, a Prop 13 low property tax base — under the CA Proposition 13 transfer of property — and transfer parents property taxes, with the sole objective to   keep parents property taxes regardless, when inheriting any kind of property more or less, and inheriting property taxes under California’s parent to child transfer, known as the  parent to child exclusion — which has been the number one target anti property tax relief parties want to  water down, or even repeal.                

Additionally,  if the homeowners’ new house is assessed at a higher value  than their previous home — their property taxes might go up, however not  as high as they would have been before Proposition 19 went into effect. So there is helpful property tax relief here if you look for it, such as being able to establish a Prop 13 low property tax base.  It is just not quite  as simple and straight-forward as it once was, before Proposition 19 more or less replaced Proposition 58 in the sunny state of California, in Nov. of 2021. 

The California Proposition 19 Newspaper Debate

California Proposition 19

California Proposition 19


The official California  “Voter Guide” (Official Voter Information Guide) tells us CA Proposition 19 actually protects Proposition 13 property tax savings; and “closes unfair tax loopholes used by wealthy out-of-state investors” — a subtle reference to East Coast investors, of which in reality there are relatively few families like this actually coming to California to inherit property from parents, under Proposition 13, and rent out to wealthy tourists. 

This exaggerated claim has already been dis-proven, yet folks that support Prop 19  and continuously question property tax relief and Proposition 13, continue to repeat this false claim in the media — even though most CA property owners back Prop 13 and Proposition 58.

Newspapers have weighed in recently on Proposition 19: in terms of support…  

• San Mateo Daily Journal: “This would enable people in high cost areas to move more easily, opening up room for new residents to the area.”

• The San Diego Union-Tribune: “While critics see this as a gift to the wealthy elderly, the great majority of older homeowners are middle-income, not rich. Allowing them (as well as disabled homeowners and wildfire or disaster victims) to downsize without suffering a huge property tax hit is a humane policy that helps people retire with much less financial stress. It would also promote fluidity in home sales, increasing the availability of larger homes for families with children and easing the phenomenon of Proposition 13 depressing the real estate free market by trapping empty-nesters in homes bigger than they need.”

And in opposition…

• Tahoe Daily Tribune: “It’s no secret that ballot initiatives can be confusing, but Proposition 19 takes obfuscation to a whole new level.  Voters can’t be blamed if they can’t remember whether Prop. 19 is the initiative that is a massive property tax hike or the measure that actually has something good for homeowners or the initiative that has something to do with firefighting. The fact is, all three are at least somewhat true — especially the part about the big tax increase.”

• Mercury News & East Bay Times Editorial Boards: “Prop. 19 merely plugs one hole in the state’s porous property tax laws while creating another. It’s time for holistic reform that simplifies the system and makes it more equitable. This isn’t it. The longer a person had owned their current home, and already benefited from inordinately low tax bills due to Prop. 13, the greater the tax break on the new property. And those who downsize would often be competing with first-time buyers for more-affordable smaller homes. The real reform would be to abolish the tax-transfer program, not expand it.”

• The Bakersfield Californian Editorial Board: “Proposition 19 is another do-over on the ballot. Two years ago, the real estate industry spent $13 million on a similar initiative campaign to expand the program statewide and enhance the benefit for eligible homeowners. Sixty percent of voters rejected the initiative.”

• Los Angeles Times Editorial Board: “But Proposition 19 would just expand the inequities in California’s property tax system. It would grossly benefit those who were lucky enough to buy a home years ago and hold onto it as values skyrocketed. It would give them a huge tax break and greater buying power in an already expensive real estate market. It would skew tax breaks further away from people who don’t own a home or who may be struggling to buy one.”

• San Francisco Chronicle Editorial Board: “[Proposition 19] is still a flawed package, designed to rev up home sales that benefit real estate agents who could reap more in commissions. It favors one narrow segment of the tax-paying public but does nothing for the rest of the state’s home buyers. The measure shows the convoluted extremes that California’s tangled property tax system produces.”

Whichever way you see it, it’s fairly clear that Proposition 19 is a billion-dollar tax increase on families. It limits one of the best tools parents have to help their children — the right, enshrined in California’s Constitution since 1986, to pass their home and other property on without any increase in property taxes, as a Proposition 19 parent to child transfer.

On the other hand, Proposition 19 still allows residents to avoid property tax reassessment, as long as families move into inherited property inside 12 months, and only as a primary residence. 

California beneficiaries inheriting property from parents can still work with trust lenders to get a loan to a trust you can also get a trust loan to buyout co-beneficiaries, while locking in a low property tax base… You can still easily buyout co-beneficiaries with a transfer of property between siblings.  Beneficiaries can always take advantage of a property tax transfer — in other words, transfer parents’  property taxes to themselves under Prop 19, what used to be Prop 58… and keep parents property taxes after inheriting property, and inheriting property taxes,  for as long as they live in their inherited home… as a standard Proposition 19 parent to child transfer or parent to child exclusion from current property tax rates. 

Moreover, Prop 19 will in fact generate additional property tax revenue, that will supposedly be put to good use in the state of California. So, it cuts both ways.

Part One: Proposition 19 Forces Changes to Prop 58 While Proposition 13 Remains Intact

California Proposition 19

California Proposition 19

What does the passage of Proposition 19 mean for the general housing market in California, one of the nation’s most expensive states to live in?  Although the state will run into an increase in revenue due to a property tax hike, some residents who reside in inherited properties might discover that living in California is becoming more and more difficult  and unaffordable.

Nick Solis, a well known real estate professional, and president of One80 Reality said recently in an interview, “California is a state where blue collar working class folks generally pass down their home to their children or other family members.”

Of course this is where trust lenders, for example like Commercial Loan Corp, are going to get busier, helping beneficiaries to get approved for Proposition 58 and California Proposition 19.  Naturally, Prop 58, Prop 19 & a trust loan lets us buyout siblings, or co-beneficiaries.  Trust lenders are going to become more popular as this type of transaction becomes even more in demand than it already is now.  Siblings who are looking to sell out, and often leave the state, will actually walk off with more money from a trust loan than they would if they sold out to a third party that is not a family member.

Mr. Solis explained, “Not everyone who inherits a home form their parents is wealthy.  Many blue collar workers and working class families bought property in previous decades when homes were affordable, and are passing them down to their kids…”

It took a quasi civil war to get property taxes to this point. The overzealous, fanatical opponents of property tax relief in California never gave up, despite 42 years of trying and failing to remove property tax relief from the California tax system. They gritted their teeth and attempted to push through proposition after tax measure after tax bill to accomplish that. For 42 years, Proposition 13, which successfully limited property tax increases, helping beneficiaries, homeowners and commercial property owners avoid property tax reassessment. Hence, Prop 13 remained untouchable. A political third rail.

Proposition 13 weathered and rebuffed numerous legislative and legal attacks… Even including one at the Supreme Court.  And nothing stuck. Prop 13, and subsequently the 1986 Amendment, Prop 58 & a trust loan lets us buyout siblings, with it’s sacrosanct Parent–to-Child Exclusion (or Parent-to-Child Exemption), this all seemed to be more or less indestructible. 

As far as Proposition 19  is concerned, the forces behind it steered clear of  disabling the right to transfer parents property taxes or inheriting property taxes from parents with the ability to keep parents property taxes. Beneficiaries still had confidence in the fact that Prop 58 & a trust loan lets us buyout siblings and lock in a low Proposition 13 tax base.  Property tax transfer, parent to child transfer, parent to child exclusion and  the transfer of property between siblings all remained safe…     

>> Click Here to Continue to Part Two…

Will California Prop 58 Tax Breaks Survive Proposition 19?

Will CA Prop 58 Trust Loans and Tax Breaks Survive Proposition 19?

Will CA Prop 58 Trust Loans and Tax Breaks Survive Proposition 19?

California can thank her lucky stars that Proposition 15 was defeated by a thin margin of “No!” votes… But these motivated opponents of property tax relief in California managed to raise  and spend, thanks to the CA Realtor’s Association and others, $47,568,642.14 to push  through a certain cleverly worded, deceptive little tax measure called Proposition 19; as the state’s first serious property tax in 43 years. 

Opponents to the Prop 19 tax measure  managed to raise a paltry $238,521. Had they been able to raise equivalent amounts of cash for PR and promotional efforts, to properly inform voters as to what Proposition 19 was actually looking to accomplish — it is unlikely that the tax measure would have passed.  As it is, the winning margin was only a few hundred thousand votes. 

Proposition 19 was a Christmas present in 2020 for certain special interests  in California, supported by the CA Legislature – the  CA Association of Realtors PAC, the National Association of Realtors,  the California Democratic Party,  California Professional Firefighters Ballot Issues Committee, and others…  designed to be presented as a pro middle class, pro-senior, pro-firefighter, pro-education property tax relief package – when in fact no one really knows how much all of that anticipated extra property tax revenue is actually going to seniors and the California school system, and firefighters. 

Certainly, the folks behind Prop 19, the California Legislature will  throw a few dollars at the Firefighters’ Union… and make things, at least on the surface, appear to be easier for homeowners over 55, for awhile…. and the schools system will receive some of that revenue no doubt.  However, according to well connected real estate lawyers,  as well as the folks at the Jarvis Taxpayer’s Association,  most of the extra revenue will be used to pay for massive, unfunded government employee pensions and related items.  How this unfolds remains to be seen.

What also remains to be seen is the next Proposition 15 type of anti property tax relief tax measure, that will be looking to strip away certain established Proposition 13 tax breaks.  And no doubt with a more clever and convincing marketing effort next time around.  And   having learned a thing or two from their success with Proposition 19, how to sell new property taxes to residential and commercial property owners in California. The Howard Jarvis Taxpayer’s Association and others will simply have to learn how to debunk and expose new property tax hikes, of any kind, more rapidly and more convincingly.  

In the meantime, California still has some effective property tax relief options left, thanks to Proposition 13 still being in one piece.  If we’re about to inherit property, from a trust or an estate, we can still look at getting a trust loan while establishing a low Proposition 13 property tax base… even without all of the property tax transfer options that heirs and beneficiaries are accustomed to passing on to their children as well… allowing their children to benefit from standard Proposition 13 tax breaks for California trust beneficiaries  to avoid property tax reassessment.

Families inheriting real property can still transfer parents property taxes upon inheriting property taxes; plus utilize their ability to safely keep parents property taxes during a parent to child transfer, or Parent to Child Exclusion; as well as during the transfer of property between siblings,  during a co-beneficiary buyout of inherited property shares through a loan to an irrevocable trust in conjunction with Proposition 58, and the help of a reliable trust lender who knows how to make full use of the  now-revised Parent to Child Exclusion… now restricted to a 12-month time-frame after a parent passes away; as opposed to no restrictive  time-frame, such as prior to Proposition 19.  
If California can’t take advantage of property tax relief one way – they’ll have to go down another avenue to get it done!  Inheriting parents property taxes, maintaining the right to avoid property tax reassessment, is still in place; it’s just not as simple as it once was. Thankfully, Proposition 13 still protects our right to avoid property tax reassessment, due to the fact that Proposition 13 is still intact, for the most part. But for how long? That’s the big question… before those tricky folks who gave us Proposition 15 and Prop 19 decide to try again, having learned from their “mistakes”, and come back in the near future with even more deceptive marketing capabilities.

Of course, in the bulk of the states in America, most tax breaks of any kind go the wealthiest residents who actually need tax reduction the least. However, in California the middle class, nor just the one-percenters, continues to enjoy these unique Proposition 13 and Proposition 58 or Prop 193 tax breaks.  Even after Proposition 19 imposed limitations on the right to avoid property tax reassessment. 

The longer middle class homeowners in California have lived in their house – factoring in their neighborhood, in terms of appreciation in value – the larger the tax break from Proposition 13 still is, as it always has been. And Proposition 58 remains about the same, allowing beneficiaries to get a large six or seven-figure loan to an irrevocable trust… establish a permanent low property tax base, plus buyout co-beneficiaries who have inherited the same property.

Despite Proposition 19, all property owners are protected from property tax increases, regardless of when their buildings were built or whether the owner even lives in them. Unfortunately for renters, rent control in Los Angeles and other urban areas only applies to multi-family apt. buildings that were constructed prior to 1979 — the rest of renters cannot partake, however can usually find reasonable rentals, where say in many other cities in the US this is often not possible. But it is in California.

Now, if we could get other taxation down, and make living easier for Californians in general, and stop companies from leaving the state due to high corporate tax… keeping jobs here in the state – California would be in better shape all around.  But that’s something we’ll need to take up with the Legislature!

With Prop 19, Can we Still Inherit A Home And Retain the Property Tax Base?

With Prop 19, Can we Still Inherit A Home And Retain the Property Tax Base?

With Prop 19, Can we Still Inherit A Home And Retain the Property Tax Base?

In opposition to what some California newspaper editorial writers,  ill-informed politicos, or ambitious realtors might tell you, California Proposition 13 is not broken.  In fact it’s doing exactly what it’s supposed to be doing.  As they say, “If it ain’t broke – don’t fix it!”

Voters in California, in 2020,  fell victim to a great deal of deceptive public relations and marketing, painting Proposition 19  as a “friendly” property tax… versus “unfriendly” property tax relief.  Always avoiding property tax reassessment  was framed as mainly benefiting wealthy families so they could rent out secondary, non-primary, properties to supposedly get even wealthier by renting these properties out – “starving” the state of much-needed revenue for schools, firefighters, and the Legislature in general.

The fact that Proposition  58 and Prop 13 property tax breaks have been allowing middle class homeowners to basically survive, saving Californians from losing their home; or being able to keep inherited property without going broke… apparently was not  important to the politicos in the capital.

Avoiding property tax reassessment at high current rates, and enabling beneficiaries to avoid having to sell their inherited property, plus being able to lock down a low Prop 13 property tax base and buyout siblings who urgently needed to sell their inherited property shares, through a trust loan working in concert with Prop 58’s Parent to Child Exclusion or Parent to Child Exemption – didn’t seem to matter at all to the folks running the state.  Tax relief like this for the middle class, as opposed to being available only to wealthy Californians, didn’t, and doesn’t, seem to be a priority, interestingly enough.

Opponents to property tax breaks for middle income residents  loaded up their promotional advertising with deceptive language and confusing explanations… Avoiding property tax reassessment was characterized as something you shouldn’t want to do; and voters were convinced they were not harming  themselves financially, as homeowners, or as trust beneficiaries and heirs to estates; and should be delighted that they were now helping seniors and firemen and schools.

In fact, they were actually helping the Legislature pay for unfunded government pensions with a rather vague financial support system for the firefighter’s union and educational system throughout the state.  The benefits were left open as to the “how” and “how much”, and written that way intentionally.

However it worked.  Proposition 19 passed… but just barely.  If it had been presented clearly,  in a straight-forward fashion – it would never have passed.  Many people voted for Proposition 19 without realizing its full implications.  In fact there  is a 160-plus page Assessor’s Handbook “AH401” that has literally been deleted from the Board of Equalization’s website because of changes brought about by Proposition 19; hence California property laws are being rewritten as we speak.

If you look at all this in depth, you can clearly see that if  Prop 19,  had been allowed to go all the way, in terms of completely stripping out homeowners’ and beneficiaries’  right to be always avoiding property tax reassessment…  this would have crippled the  middle class in California.  And it certainly will present some economic challenges to the middle class… however it stops short at being a complete disaster.

Property owners can still take the right steps for avoiding property tax reassessment, can still buyout co-beneficiaries, can still establish and maintain a low property tax base. With a few limitations.  Let’s just say it could have been a lot worse for middle class families.   And that is where these critics of property tax relief are probably heading – so Californians have to keep their eyes open.  But at least now, as many California homeowners and even renters  nurse their buyer’s remorse – they will be prepared if these incessant opponents to property tax relief come back around again to “finish the job”.

A lot of Californians don’t understand how complicated property tax relief is going to be going forward.  Every homeowner is going to need a Proposition 13, Proposition 58 and Proposition 193  expert to address these changes – to take full advantage of the Parent to Child Transfer, or Parent to Child Exclusion, and to analyze their property tax situation realistically;  with the help of a property tax expert.  To see if they are going to have to move into an inherited property within 12-months, and use it only as a primary residence,  to evaluate if that’s even going to be possible after the parent leaving them a home passes away.

All these property tax relief matters that were once so simple, that were implemented simply by habit before Proposition 19 came about, are now going to need expert input from well known property tax specialists like Prop 13/Prop 58 Consultant Michael Wyatt, or property tax relief real estate attorney Devin Lucas… Or trust loan and Parent to Child Transfer experts at a firm like  Commercial Loan Corp who fully understand how to make use of the exclusion for reassessment of property taxes on transfers between parents and children.

Professionals like that will be needed to side-step  mistakes and not miss out on always avoiding property tax reassessment – ending up paying property taxes at current high rates;  hopefully inheriting property taxes form parents.

Beneficiaries and homeowners are going to have to be incredibly careful when looking to  transfer parents property taxes, with the goal being  to keep parents property taxes on a property tax transfer, using the time honored Parent to Child Transfer,  or Parent to Child Exclusion.  The same applies to going to a trust lender, for example, to get a loan to an irrevocable trust to be able to get approved for Proposition 58 for the transfer of property between siblings – commonly known as buying out a siblings’ share of house – buying out siblings’ property shares,   Or the buyout of co-beneficiaries’ property shares.  Now not as simple as it once was.  But still do-able, working with the right firm who will lead you in the right direction and evaluate your property correctly.

For instance, without expert assistance it’s very easy to accidentally trigger a property reassessment under Proposition 13 that might very well increase your property taxes 10 or 20 times, for yourself or for your heirs or beneficiaries.  It’s so easy to handle a transfer of property incorrectly, without a specialist helping you, meaning a property tax consultant, or trust lender if you want to buyout annoying or dishonest siblings…Or a real estate attorney familiar with Prop 13 and Proposition 58.  It is easy to make an error in a Trust that kills your tax cap that would have saved you thousands of dollars.  Doing these things on your own is terribly risky.

When Prop 19 does into affect  on Feb. 16, 2021, California Prop 19 will change a parent’s ability to leave their children or grandchildren their Proposition 13 protected tax base.  Property will be reassessed at its current fair market value, unless you get expert help to identify a work-around or property tax reduction solution.  Challenges will exist where there were none before… so finding some experts you can trust will become an essential step going forward.   

Proposition 19 and the Impact on Prop 58 & Property Taxes in California

Proposition 19 and the Impact on Proposition 58

Proposition 19’s Impact on Proposition 58

On Election Day in November of 2020, a tiny margin of votes in California swayed the outcome to pass the California Association of Realtors’ effort to convince California voters that Proposition 19 was a marvelous new property tax break to help older homeowners and families inheriting real estate from parents and grandparents.

Also, there was an extremely clever sentimental component built into the Proposition 19  marketing campaign; that was designed to sway voters with a promise to use a good deal of the projected increase in property tax revenue to beef up budgets for fire-fighters… and the educational system. So who on earth would object to revenue going in those directions?  Obviously, no one.  When in fact, from what we hear, very little revenue will actually be going in that direction, and instead will reportedly be used to pay for unfunded state government pensions “and/or related needs…”

All those opposing this property tax measure wanted homeowners over 55 and those who are “severely disabled” (and naturally this will affect a certain number of  older residents) to continue to keep the same number of times they can transfer their tax assessments.

Proposition 19 marketing language dances around this “severely disabled” issue… avoiding specific guidelines for Californians as to what marks the difference between “normally” or “moderately” disabled, let’s say… and “severely” disabled!  And instead, allows homeowners who are  over 55, and reportedly “severely disabled”, or whose homes were destroyed by wildfire or some other “natural disaster” – to transfer their primary residence’s property tax base value to a replacement residence of any value, anywhere in the state.

Jon Coupal, President of the Howard Jarvis Taxpayers Association, summed it up pretty well when he said, “Proposition 19 is an attempt by Sacramento politicians to raise property taxes by removing two voter-approved taxpayer protections from the State Constitution. This measure would require reassessment to market value of property transferred from parents to children, and from grandparents to grandchildren.”

The small print, and in fact in this case micro-print, continues to give folks inheriting property from parents the ability to avoid property tax reassessment… but only if they use the property as a primary residence, and only if they move in within 12-months after the parent passes away. 

As long as this deadline is met, Prop 19 apparently does not violate the Proposition 13 transfer of property,  or property tax transfer in general… And for beneficiaries looking to sell their property shares, there are trust fund solutions to help avoid beneficiary conflicts tied into Proposition 58 and Prop 13 tax breaks, for California property owners, or to work around the new Proposition 19 property tax obstacle that forces homeowners to move into inherited property within one year or lose the “Parent to Child Exclusion”. 

Californians will still be able to transfer parents property taxes when inheriting property, and inheriting property taxes from parents –  beneficiaries can keep parents property taxes, there is no other assessment or reappraisal imposed on the Proposition 58 Transfers Between Parent and Child; Grandparent and Grandchild as discussed on the BOE site in the section regarding the Proposition 58 Parent to Child Exclusion or Parent to Child Transfer; or on any other transfer of property between siblings, such as a buyout of co-beneficiary property shares.         

“Severely disabled” is pretty vague language however.  How can you actually define that, with parameters that California trust beneficiaries, estate heirs, and homeowners can follow? Clearly, you cannot.  

Proposition 19 waters down the Proposition 58 Parent to Child Exclusion or Exemption to some degree, although we can still work with it, but it limits property tax breaks, as they say, for “certain transfers of real property between family members”. Proposition 19 limits the exclusion from reassessment for transfers from a parent to a child of $1 million of fair market value. If the property value exceeds $1 million, it will be partially reassessed but not to full market value (i.e., FMV less $1 million). If the child/beneficiary does not use the home as a primary residence, it is reassessed at full market value (FMV).  Naturally, Proposition 19 is not retroactive and will not apply to any property until it is transferred (or deemed transferred) after Feb. 15, 2021.

So far, Proposition 19 is mainly impacting the Proposition 58 Parent to Child Exclusion From Property Tax Reassessment; and the limits they reference refer only to the 12-month deadline plus beneficiaries using a property tax transfer when inheriting property taxes only for a primary residence – not for an investment property that can be rented out. They claim to be expanding tax benefits for transfers of family farms as well, although we don’t know precisely what this entails.

Children or grandchildren who inherit their parents’ or grandparents’ primary residence but do not move in as their own primary residence will be re-assessed at current market value. This will affect many families, like established family farms. For example, if a family farm that was purchased for $300,000 (600 acres at $500 per acre) a generation ago with a tax bill of $3,500 – this could be reassessed by the tax assessor to be $6,000,000 (600 acres at $10,000 per acre; price per acre could vary depending on market area) resulting in a tax of approximately $72,000.

How are families supposed to deal with this sort of tax hike? Could the California Legislature be this greedy for extra tax revenue (i.e., that they were doing perfectly well without for decades) as to completely ignore the ability for families to survive under these sort of extreme property tax conditions? In the long run, how does thousands of family farm businesses going bankrupt possibly help California?

This significant property tax increase could affect many family farms that were once profitable in terms of basic survival going forward under these tax conditions. So you understand all this and can make sense of all these details? No? Well get in line because short of attorneys and CPAs, no one else understands all the fine points either!

Why Californians Need Proposition 58 and Enhanced Property Tax Breaks

Why Californians Need Proposition 58 and Enhanced Property Tax Breaks

Why Californians Need Proposition 58 and Enhanced Property Tax Breaks

As we all know, Proposition 58 has been tampered with, in the form of Proposition 19; finally giving the CA Legislature the opportunity they have been waiting for, for decades, to water down property tax relief in California.  However, despite this, the state still has property tax relief options that are materially sound. They certainly should not be taking payment plans seriously, that are  offered up by California Governor Gavin Newsom as a realistic  way to “help” homeowners that owe the state on past due property taxes.

Sure, why not allow property owners to pay off what they owe more slowly. But the Governor and his team should also be looking at far more robust options, where homeowners can actually spend less, and save more.  So middle class residents can access the type of tax cuts and property tax breaks that rich folks have enjoyed for decades.

For once, we’re talking about tax cuts for middle class residents, the type that upscale beneficiaries receive through high-end tax attorneys and expensive CPAs; with a trust loan, in concert with tax benefits from Proposition 58… which enables them to buyout siblings who own a share of the house their family has inherited. So they can own an inherited home by themselves, with a low Proposition 13 property tax base.

For many middle class heirs, it’s a perfect package.  Although you still have to use Proposition 58 within year one after mom or dad passes… to utilize the CA Parent to Child Exemption – if you want to continue inheriting your parents’ property taxes.  To avoid paying property taxes at present market value, in order to keep parents’  low property taxes, completely avoiding property tax reassessment. 

In order to prevent a cleverly disguised Proposition 19 or Proposition 15 type of tax measure to come along and weaken, or even remove, property tax breaks for middle class residents – California needs to strengthen the state’s property tax laws, and cement measures that,    despite Proposition 19, still  can guarantee the right to a property tax transfer with a parent to child exemption, or parent to child exclusion; as long as you have a reliable trust lender you can depend on, for example like the Commercial Loan Corp. in Newport Beach, who can be reached at 877-464-1066.  They apparently have the resources to not only provide the money to equalize co-beneficiary funding, establishing a sibling-to-sibling property buyout,  with a low property tax base to avoid property tax reassessment. 

All of the details that make up the foundation of this process are  verified on blogs like this  one, Property Tax Transfer, or the micro-site that furnishes a deep dive into Proposition 13 and Proposition 58  details and narratives: Trust and Estate Loans.   And for those that prefer the hard cold facts and only the facts, there is the respected  state government Website, the California State Board of Equalization, that provides arguably the most  objective property tax relief overview available anywhere, concerning

Despite the inconveniences imposed by Proposition 19, California still has an intact, robust Proposition 13, and fairly intact Proposition 58 as long as one doesn’t exceed that first 12 month deadline period after the death of a surviving parent, or decedent… and one is sure to move into an inherited home as a primary resident, not renting it out, since this is sole bone critics of Proposition 13, Proposition 58, and the CA Parent to Child Exemption have been gnawing at incessantly for decades – using the Bridges family as their one and only example, over the past 40 years, believe it or not.

The problem with Proposition 19 forcing you, after inheriting property from your parents, to move into your parent’s home as a primary residence, or lose your ability to avoid property tax reassessment… on top of being forced to sell your own home, is the fact that your parent’s house may be too small to suit your family. Or the school district may not be suitable, or may be too far away. Or the commute to your job, after moving, may add an hour or more each way, causing another problem.  No one in the Legislature asked those questions; or even considered these issues as potential problems.

Moreover, the question has arisen among critics of Proposition 19 – is this simply a step to get us to the point where they lower the boom on us – and completely remove the parent to child exclusion, effectively wiping out this critical tax break altogether?  The question has come up… however, no one really knows the answer.

These days, post Proposition 19… California homeowners trust the State Legislature less than ever.  Once it sank in how they had been misled  by Prop 19, and had actually been duped into voting for it.   Luckily, there was enough push-back on this to prevent the CA Legislature from going too far. There is enough property tax relief in the system to be useful to the middle class… to help families that really need this kind of tax break. 

Even if Proposition 19, in terms of property tax relief and it’s front-runner tax break, the CA Parent to Child Exclusion or  Exemption, is like walking around with a sprained ankle… Californians, unlike middle class homeowners in 48 other states, will still have property tax relief to turn to. Even if it does create an inconvenience for homeowners and inheritors of real property, and does need to be repealed in the near future.  It won’t be so easy for the California Legislature communications team, and the Realtors Association press release copywriters, to spin the issues with a deceptive branding campaign and confusing marketing language mis-characterizing the CA Parent to Child Exemption… On the next go ’round it will be a very different story.

What We Need

For one, California needs property tax relief with iron-clad protection, to remain safe from any Proposition 19 or Proposition 15 type of tax obstruction or property tax hike that may come along in the near future to water down or even remove crucial property tax breaks.  Not property tax deferment, as the Governor of California has proposed… Or a payment plan to give folks owing property taxes a little more time to payoff what they owe, as proposed in San Diego by two County supervisors.  To be frank, these suggestions are stingy, and are half-way measures at best. 

Proposition 19 has made the Parent to Child Exclusion challenging enough. So why not propose enhanced property tax relief options now, in the midst of a seemingly endless pandemic.  Where most  Californians are struggling… even impacting the upper middle classes now – upscale homeowners, high-end business property owners, commercial property owning landlords with office or residential tenants, or beneficiaries inheriting property from parents…

Payment plans or deferred tax payments are not what homeowners need. They need help in terms of being able to spend less… as making more is very difficult right now.  So at least let’s help them to spend less! Significant property tax breaks will help accomplish that. Gov. Newsom must be able to see this.  He is not so dense as to miss that point.  We are sure he and his team can come up with some enhancements to what we already have. Roll back Prop 19 for one. Repeal it immediately, as unemployment continues to follow the Covid health disaster like an evil twin!

Then add components to Prop 58, instead of watering it down.  That will help middle class homeowners and commercial property owners to spend less on property taxes.  Tax breaks exactly like the billionaires have – at the disposal of the middle class.  Why should only they and not the middle class and upper middle class have authentic tax cuts?  And plan, then launch, a generous STATE Stimulus Package that will create jobs and heal the sick, as well as preventing any new infections with preventative vaccines that are reliable. This is a good start.

California Proposition 19 Lenders and Irrevocable Trusts

California Proposition 19 Trust Loans

California Proposition 19 Trust Loans

Post Proposition 19 Californians must face certain  changes to the Proposition 58 “Parent to Child Transfer” tax break, the “Parent to Child Exclusion”. 

Property owning Californians now have to grapple with specific challenges, where property tax relief is concerned. It has to be said that, with all due respect, that the realtor community  in California is straining credibility.  They backed Proposition 19, so anything they propose going forward, concerning property taxes or property tax relief, we can assume is only going to benefit the California realtor community.  Not the buyers, or renters…  or owners.  This is fairly obvious. 

Frequently being the wealthiest of the wealthy, we find it ironic that many realtors in California bleat and moan about one family – the Bridges family in Los Angeles – using the one often repeated example to advance the shaky case that everyone in California benefiting from Proposition 13 and Proposition 58 are fabulously wealthy, are elderly, and are intent on buying up all the multi-million dollar beachfront properties in the state, simply to rent out to other fabulously wealthy people from other states, vacationing in Malibu or Santa Cruz or Santa Barbara, having a grand old time – while the besotted realtor community suffers terribly from the lack of homes available to them to go to market. These claims basically debunk themselves.

Moreover, as the claim goes, all because of Proposition 13… and all those rich movie stars buying up all those luxury properties so they can make a few extra dollars every month, reportedly $10,0000 to $15,000, renting out an inherited investment property, like the Bridges do, or did. Again, Bridges being the only name ever used as an example, repeatedly in articles and editorials. Or are the Bridges the only family ever to be involved in this peculiar practice?

We simply cannot figure out why these rabid critics of property tax relief, practically foaming at the mouth, cannot locate another wealthy show business family to bring up when discussing this supposedly “out of control” practice of renting out inherited beachfront properties to vacationers at fairly egregious prices.

Apparently, according to critics of Prop 13 and Prop 58, it’s all because of the families  taking advantage of the “Parent to Child Exclusion” that the real estate market has shrunk a few percentage points over the past few years.  Utilized only, they tell us, by wealthy elderly homeowners and their offspring. No one else. No middle class families, no veterans, no retired folks living on a fixed income.  

And this argument, involving the Bridges family as the sole example of a family of multi-millionaires using an inherited home as an investment property to make a few extra dollars on the side has literally remained unchanged for going on 35 years now.   A lot of people think something is awry with this picture.  So let us take a quick look at the history behind all of this…

So what does the realtor community all across the state of California do, after putting up with supposed armies of rich elderly homeowners and their grown children, renting out inherited luxury homes on the beach for decades – along with having the nerve to actually reside in their own home for decades, simply to take advantage of Proposition 13 or Prop 58, so they can avoid property tax reassessment and rent out luxury homes to upscale tourists?

Apparently also further enraging the realtor community AND the Legislature by also taking advantage of a certain Proposition 58 transfer of property – these wealthy homeowners also take terrible advantage of the California tax system by using these Prop 58 tax breaks to buyout property shares inherited by co-beneficiaries as a transfer of property between siblings – combined with the transfer of parents’ property taxes when they are in fact inheriting property taxes from a parent.

Actually “having the gall” as many critics of property tax relief would put it in the Los Angeles Times or San Fran Chronicle, to basically save a small fortune on a property tax transfer, by exercising their right to keep parents property taxes rather than pay full freight with full up-to-date market rates – paying “their fair share” without “taking advantage” of Proposition 58’s Parent to Child Transfer, or Parent to Child Exclusion.

Apparently, the Legislature and the realtor community are so hard-up for cash that all the property owners in California should be expected to pay reassessed property tax rates, adding thousands, often tens of thousands to ones’ tax bill… and not take advantage of Proposition 13 & 58. Eventually, the Legislature and their friends at the California Association of Realtors  decided something had to be done about this perpetual injustice!

So the California Association of Realtors and other supporters of  a tax measure they called Proposition 19, in 2020, raised $63.8 million ($58.6 million from CAR) and $4.9 million from the National Association of Realtors.  Opponents raised less than $50,000 to wage a political-social campaign, and finally these critics of property tax breaks took down the dreaded Parent to Child Transfer tax break – protected by the triple-dreaded Proposition 58 tax measure since 1986. They weren’t actually able to completely remove this tax break… However, they came awfully close.

Yet as residential or commercial property owners found out, after all the hysteria died down across the state, and property owners finally realize that they had in fact been bamboozled into voting for this tax measure that was turned out after all to be a hungry tax wolf disguised as a charming sheep who just wanted to help seniors and school children. BUT – they still had plenty of property tax relief options left… they were just a bit more challenging to access. Yet that really would be a political third rail. Especially after voters in California finally saw they had been deceived. 

Therefore, despite all the worrying about this, all these property tax relief options remain intact. If we inherit parents’ property from a trust or an estate we can still take advantage of Proposition 13 & 58 to access a large 6 or 7-figure loan to an irrevocable trust to buyout co-beneficiaries so we can own it solo, and keep parents low tax base… frequently without a credit report, without up-front charges, with low interest, no hidden fees, usually in just a few days, and always with very simple terms – unlike your typical bank or credit union.

As long as we have a Prop 58 friendly trust lender, for example like the Commercial Loan Corp. who can reached at 877-464-1066 so you don’t have to hunt for the number… Plus there are a few Websites besides this blog that explore the often misunderstood process of  taking full advantages of Proposition 58 Parent to Child Transfer, or Prop 193 Grandparent to Grandchild Exemption carefully covering Transfers Between Parent and Child or  Grandparent and Grandchild.

And of course there is the often used research Website, with up to date news and  information on Proposition 13 at the Howard Jarvis Taxpayers Association  or for a formal cutting edge look at updated information exclusively vetted and imparted for California property owners, regarding property tax relief for those impacted by Covid-19, at Andersen.com… Moreover, to take advantage of Proposition 13 & 58 whenever and wherever possible!  There is no point in ignoring any property tax assistance you can receive, one way or the other!

Best CA Lender For A Proposition 58 Loan

California Lenders for Irrevocable Trusts

California Lenders for Irrevocable Trusts

When Should a Trust Lender Enter the Picture?

There are many ordinary, middle-income families, often referred to as “trust fund heirs” who put their assets into a trust with the help of an experienced trust lender like Commercial Loan Corp. When Mom or Dad passes away, and the property is held in trust,  some beneficiaries either sell their inherited property or they keep the property and, through  a trust loan and Proposition 58 tax benefits, manage to lock in a low property tax base, and frequently buyout an inherited property from co-beneficiaries, to be able to own an inherited  home without difficulties and complications from shared property ownership. 

On the other  hand, if beneficiaries in that position decide they’d prefer to sell the property directly to an outside buyer, instead of receiving a typically higher payment from a trust loan – then those beneficiaries will get significantly less money due to realtor fees (typically 6%) when the property sells. 

Interestingly enough, beneficiaries will generally net, on average, $16,400 or more by not selling the property – and instead having at least one sibling, a co-beneficiary, take advantage of Proposition 58.  Moreover, the average family estate will net $45,000+ more than if the property was sold outright to an outside buyer, with the  revenue from that sale being divided evenly between the  beneficiaries.

Higher taxes imposed on families by Proposition 19 will tend to compel a great deal of beneficiaries to sell their inherited property, even if their preference is to keep  the old home and/or land.  Naturally, this is often good for realtors, who will tend to bank more commission revenue from increased sales.  However It’s not good for a middle class or working class family who is suffering the loss of a generally beloved Mom or Dad.

A trust lender usually enters the picture when enlisted by a beneficiary, or beneficiaries, who wish to keep their inherited property, while buying out owned shares of the same inherited home, mutually inherited by siblings.

Trust lenders who run their practice with integrity generally work with siblings that have lost a parent and are  helped a great deal by the California Constitution’s provision that serves to protect beneficiaries from owing  thousands of dollars in property taxes,  as they settle estate or trust business matters and typically complicated financial issues.

A trust loan introduced into this type of estate or trust equation allows a beneficiary or beneficiaries, often referred to as “trust fund heirs” by realtors and real estate attorneys, to retain the home they have happily inherited from their Mom or Dad – safely and securely, at a nice low property tax base. 

Meanwhile, without having to actually sell the property, co-beneficiaries walk off happy as clams, with more cash in their pocket having had a loan to an irrevocable trust used to buyout their shares in their inherited property – than if the property had been sold to an outside buyer, at current market value. 

Middle class beneficiaries typically do their own research on how to protect their inheritance from the tax man… On property tax breaks that make real sense, on trust lenders when inheriting property taxes; on property tax transfer and estate planning; and usually on their legal right to keep parents property taxes as well as having the ability to transfer parents property taxes at the same low tax rate that their parents had. 

Many beneficiaries will conduct their own research on property tax benefits first (prior to going to a trust lender) on how to avoid property tax reassessment, on Parent to Child Transfer benefits and  the complex Parent to Child Exclusion (from current tax evaluation). 

Beneficiaries gravitate to info-sites such as the state government BOE site at https://www.boe.ca.gov  or to a well known trust lender like the Commercial Loan Corp firm we mentioned here, they can also be reached at 877-464-1066; generally due to their reputation as a firm with a family  atmosphere, where clients all seem to get treated like V.I.P.s  regardless of their net worth or the value of their inherited property.

Loans to Irrevocable Trusts

Loans to Irrevocable Trusts

Loans to Irrevocable Trusts

How Can I Inherit a Home & Keep the Low Property Tax Base?

Perhaps a lot of regular middle class folks out there waiting for an inheritance aren’t aware of it – but since 2016 many of us in the business of dealing with middle class heirs, waiting for an inheritance in trust or in an estate, involved in an unusually large number of conflicts between heirs or beneficiaries… Frequently turning ugly and downright out of control. 

As you can guess, these conflicts typically revolve around the subject of money… Frequently, in an estate scenario, one or more siblings insist on selling the home they have inherited from Mom or Dad, to generate “fast cash” – often in heated opposition to co-beneficiaries inheriting the same home, for example, who insist on retaining that property, as the emotional or sentimental value for them far exceeds the cash value. 

Hence, this often fires up a serious conflict within the family group.  Or – one or two heirs claim they should be receiving a much larger percentage of the family inheritance, which is frequently based on the sale of inherited property, as cash assets are often very modest in middle class estates these days.

Over the past four or five years, we can clearly see a significant increase in these family squabbles… often, for example, in 17 out of 20 estate or trust situations we often see in-fighting like this, that frequently destroys sibling relationships.  Or perhaps conflicts over the issue “to sell or not to sell” inherited family property, or even conflicts over the assessed value of that property… is merely the match that ignites emotional conflicts that were there under the surface to begin with.  It’s no surprise that we often see at least one or two inheritors, per estate or trust, that want  to keep their inherited home, with one or two, or more, beneficiaries pushing to sell the house as soon as possible. 

It’s very common these days to see siblings lock horns almost immediately, when the subject of selling their inherited home is raised. With additional battles flaring up over who should be receiving the larger share of cash assets – or “who” gets “what”  percentage of the home the family is inheriting.  home left by a beloved parent.  We see this pattern repeated over and over again; the same words, similar disputes and similar claims.

A Trust Loan Solution to Family Conflicts

In California, Prop 58 loans to irrevocable trusts often act as a solution to many family conflicts revolving around sibling disagreements over whether or not the family should  retain or sell inherited property from parents.  With a trust loan working in conjunction with Proposition 58 – a process referred to as Prop 58 loans to irrevocable trusts – you can then buyout  beneficiaries    and  end up owning  your inherited property by yourself.

Interestingly enough, siblings who insisted on selling out actually end up receiving more cash then if there had been no trust loan funded and outside buyers had become involved; so those siblings can move forward with their lives, leaving you in peace. Interestingly enough, most families that call  a trust lender to get this type of funding started and accomplished, know next to nothing about the process of Prop 58 loans to irrevocable trusts. 

Residential and commercial property owners should research and learn all about the benefits provided by trust lenders furnishing loans to irrevocable trusts to enable the buyout of property shares from sibling co-beneficiaries; along with CA Proposition 13 transfer of property, plus locking in a low property tax base rate in conjunction with Proposition 58 – all associated with a transfer of parents’ property and transfer of parents property taxes.

Homeowners in every state should understand what inheriting property taxes is all about, how to keep parents property taxes with property tax transfer of all sorts – and why parent to child transfer, or parent to child exclusion, is so profoundly important at the base root of property tax relief in California… and hopefully in other states as well, if motivated folks begin sending letters and emails to their representatives in Washington, and if, by a miracle, this catches on and actually sprouts results. 

Living in a state with low property taxes can provide a major benefit, rather than a liability, to your life. Even if many homes are pricey perhaps to begin with… lowering property taxes on them, to a number you can really feel, can have a profound affect on your lifestyle, and maintain the quality of your life, to where you need it to be.

Goods and services and real estate can be pricey in states like Connecticut, Texas, California, New York, New Jersey, Massachusetts… these are all expensive states, in terms of day to day living… However, getting a “life-toll” such as property taxes down to a manageable level can change your entire outlook on your life, eliminating that particular financial struggle.

Moreover, the concept of paying yearly taxes on something you purchase and then keep for many years, might be flawed to begin with. What other large purchase you may make continues to charge you fees such as taxes, after the initial [large] purchase? A boat? Plane? Car? Motorcycle? None. Only real property. Perhaps the whole concept of taxing real estate after the initial purchase could use some fresh, new examination.

Speaking of trust liquidation, California is still the only state in America where you can avoid property tax reassessment at current rates; capped at 2% taxation basically as long as you own property inherited from parents initially… thanks to the 1978 CA Proposition 13.  Plus, the component involving Prop 58 and  “trust liquidity” is particularly  popular with middle class beneficiaries who want to sell the property shares they have inherited from a parent, and walk off with even more cash than if they had sold out to an outside buyer.  Conversely,  Proposition 58 trust loans are just as popular with members of families inheriting property from parents, who wish to buyout their siblings, co-beneficiaries, that are looking to sell their inherited shares.

California business and residential property owners, in addition to having the right to keep parents property taxes, and transfer parents property taxes upon inheriting property, and then inheriting property taxes at the low Prop 13 two-percent tax rate maximum – can maintain a parental property tax transfer basically forever, as a Parent-to-Child Transfer, or Parent-to-Child Exclusion, as long as all requirements for Proposition 58 have been met. Californians can even apply for the same tax break on a secondary property inherited from parents.

If you’re a California property owner who is looking to buyout siblings who insist on selling their inherited property, while retaining the same inherited property from parents with a trust loan, avoiding property tax reassessment from that point on – you can find content that covers this in-depth, along with information on how to get approved for Proposition 58, on a state government Website like the California State Board of Equalization, which is found at  https://www.boe.ca.gov/proptaxes/faqs/propositions58.htm  

A lot of folks research these issues and delve more deeply into California property tax relief, on multiple levels, at established niche  Websites such as Commercial Loan Corp…  or a free resource blog like this one, Property Tax Transfer.  Trust loans working in accord with Proposition 58 or Prop 193 make it possible for heirs and beneficiaries to sell shares of inherited property, a beneficiary buyout of sibling property shares, or as realtors put it, “the transfer of property between siblings”, and “lending money to an irrevocable trust“ – typically from an irrevocable trust loan lender.

The fact is, we need to understand all about our rights, with respect to using a 6-figure loan to an irrevocable trust — not only as a way to buyout co-beneficiaries, but also as a tax break that locks in a low property tax base in line with CA Proposition 13 parental property tax transfer. 

Every property owner in every state in America should be more familiar with current changes to property tax relief laws in California; including the pesky little details that support the invaluable system that allows homeowners and commercial property owners to buy out co-beneficiaries’ mutually inherited property — focusing on the tax laws that makes sibling-to-sibling property transfers work in California.  Someday, perhaps in every state in America, if we want to make property taxes fair and equal to all property owners in this country.