Article 13-A of the California Constitution

Protecting Californians From Arbitrary Tax Hikes

Proposition 13 once protected all taxpayers, homeowners and non-homeowners — by maintaining a 2/3 vote requirement in order to pass most tax increases, including state sales and income tax. Intentionally making it more difficult to raise taxes on residents. Particularly critical with respect to property taxes.

Unfortunately for middle class tax payers, a tax measure entitled “Proposition 39” was approved in 2000 by a thin razor edged margin after a massively budgeted PR & marketing campaign was launched by a few Silicon Valley billionaires who thought it would be advantageous to make middle class homeowners pay for their Silicon Valley corporate tax breaks. Similar to our recent tax breaks for mega-wealthy Americans and high-end corporations. Again, mainly pulled from the pockets of middle class homeowners and working families. A sad testament to tax inequality.

So-called “Proposition 39” revised the 2/3 vote requirement for certain bonds to 55% — making it way too easy to pass those bonds, since they are paid back only through increased property taxes. Again, wealthy hands in the pockets of middle class families.

Property Tax Postponement Instead of Property Tax Relief

The State Controller’s Property Tax Postponement Program allows senior or elderly homeowners, blind homeowners,  and severely disabled property owners, to take advantage of a marginally helpful “tax deferment” affecting this year’s property tax bill. When the more equitable solution would obviously be total or partial exclusion from these property taxes; especially in the midst of a severe Pandemic — with subsequent economic failings and short-comings, with no real end in sight.

Over the past 44 years, the Howard Jarvis Taxpayers Association has battled and confronted California based special interest organizations, such as the CA Association of Realtors, groups, bureaucrats, and public-employee unions, among others, who benefit from government spending.

Beginning in 1978, Proposition 13 was determined to protect home ownership from overly greedy, destructive taxation. Therefore California property owners strive to continue enjoying the $528 billion that the Proposition 13 and Proposition 58 (now Proposition 19) Howard Jarvis Tax Revolt has saved homeowners by helping them, overall, to avoid property tax reassessment; allowing families to transfer  property between siblings without a crippling property tax reassessment, avoiding a sibling to sibling buyout.  Enabling beneficiaries to transfer parents property taxes to themselves through property tax transfer relief, when inheriting property, and subsequently inheriting property taxes from a parent — thereby inheriting property while keeping a low property tax base.

Hence, allowing inheritors to keep parents property taxes basically forever… generally with property tax transfer relief from a parent-child transfer — ultimately, through an established parent-to-child exclusion.  Something no California homeowner or beneficiary wants to lose.

CA Property Tax Relief Under Attack

Is CA Proposition 13 Property Tax Relief Under Attack?  

California taxpayers are in particular danger due to the fact that the CA State Legislature and real estate plus other special interests are looking to continue efforts to unravel property tax relief in California simply to accelerate real estate sales and commissions, plus increase overall property tax revenue to state coffers.  Just for the record, Proposition 13 has saved California taxpayers $528 billion.

If critics of property tax breaks unravel Proposition 13 any more than they already have, real-estate-business owned politicians can accelerate property taxes on homeowners by 400%, or north of that figure, by destroying Proposition 13 protections that keep restraints on increases of sales tax with new property tax relief law in California that could add hundreds of billions of dollars, going forward, of new tax revenue from new rules for property tax transfers in California — costing every middle class and working CA family a small fortune in increased property taxes!

The Proposition 13 bullet-proof “2/3 vote requirement” to protect  Californians from greedy, careless or arbitrary property tax hikes has been watered down and severely weakened by those who oppose property tax relief in California, and can easily be further unraveled during this upcoming year. 

Could California See the End of Crucial Property Tax Breaks?

Lifting the 1% or 2% cap on the maximum property tax rate is their next objective. After that, Proposition 13 and $528 billion could be stolen from California taxpayers forever.  Needless to say, this would not be healthy for the state. We could possible see the end of CA Proposition 13 property tax relief — possibly the demise of the parent-to-child exclusion… most damaging of all.  How these politicos and certain members of the real estate community  could support such irresponsible tax hikes on the backs of middle class Californians, is almost impossible to ascertain or understand.  

Yet it’s entirely possible that in the state of California we could actually begin to see the unraveling  of third-rail protections supporting low tax rates from parent-child transfers — the end of laws allowing homeowners to avoid steep property tax reassessment  when inheriting property taxes… for so many decades protected so well by Prop 13 and  Proposition 19 (formerly Proposition 58).

These were once unchangeable built-in property tax breaks protecting parents and their children when they be easily able to transfer parents’ property taxes and keep parents property taxes basically forever, in perpetuity. when inheriting a home from Mom or Dad.

Proposition 13 has forced local governments to manage their finances better — one reason the initiative had such overwhelming popular support.  Most cities and counties have been very successful under Proposition 13. If some have failed, the problem was not Proposition 13. It was mismanagement, lack of sensible  planning… and reckless spending.

A Second California Tax Revolt

A Second Tax Revolt will take time, energy, resources. Funding. Organizations such as the Commercial Loan Corporation; the Michael Wyatt Consulting group; the Cunningham Legal law firm; Kevin Kiley’s ACA-9 initiative; and the Howard Jarvis Taxpayers Association are all providing planning and backing for the support and rescue of Property Tax Relief in California… Proposition 13; and the possible return to Proposition 58 with unlimited parent–Child Exclusion rights for homeowners and beneficiaries inheriting property from parents.

Simply some of the reasons the Howard Jarvis Taxpayers Assoc. is launching their “Second California Tax Revolt”, to build and protect property tax relief measures for all Californians, regardless of age, station, or net worth.

It took four million Californians to pass Proposition 13. HJTA hopes to mobilize as many to defend Proposition 13, because that’s what may be needed to keep $528 billion in our pockets — our honest,  hard working California property owning pockets.  And not flowing into mercenary state and county tax collectors’ pockets.  

Common Mistakes to Avoid When Transferring a Property Tax Base

Transferring Property Taxes in California

Transferring Property Taxes in California

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.

Parent-to-Child Exclusion

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.

What Has Made Proposition 13 So Popular, from 1978 to Now?

Proposition 13 Saves Californian Property Owners Thousands

Proposition 13 Saves Californian Property Owners Thousands when compared to property tax systems in other states.

CA Proposition 13: Consistency and Necessity

In the 1970s property tax hikes were completely out of control. Especially for working families and middle class folks who were dependent on a fixed income… retired veterans and other government and municipal workers like retired postal workers; homeowners receiving Social Security, and retirees living on a modest pension; etc.

During the past twelve months the average home price in California accelerated by over 19%, the California Association of Realtors reports – seemingly unaware that this very statistic belies what they believe is a good thing (the unraveling of Proposition 13 and property tax relief generally in California), in actual fact it’s a good thing for realtors… not the middle class and working families across the state! In fact it shows that Proposition 13 is as necessary as ever.

Stabilizing CA Property Taxes Throughout All 58 Counties  

Kris Vosburgh, Howard Jarvis Taxpayers Association exec director tells us: “It [Prop 13] resulted in the stabilization of neighborhoods and allows people to stay in the neighborhood where they bought homes and not be forced out by increasing tax. The basic benefit to both new and old home buyers is that you know what your taxes are going to be from year to year.  One doesn’t have to shudder in fear.”

And shuddering in fear was exactly what middle class families did when tax time tolled around every year.  You never knew what your tax hike was going to look like. There was no stability in property taxation… No consistency you could rely on.

Before Prop 13: An Epidemic of Elderly & Retiree Foreclosure

In Los Angeles County in 1975 and 1976, over 400,000 senior  homeowners, many who were elderly, in their 80s or 90s, could not pay off their property taxes, simply because they couldn’t afford the accelerated tax rates and were either at risk of being forced onto the street – or literally were put out onto the street with clothes, furniture and all! Many who were elderly folks and nowhere else to go. Not a pretty picture.

Elderly couples and other older individual homeowners living on a modest fixed income were impacted most of all by these arbitrary property tax hikes. Many were living free and clear but were in grave danger of losing their home, despite the lack of debt, mainly because they simply could not afford excessive property taxes.

And as millions of older middle class Californians were being pushed out of their homes, onto the street, the heroic Howard Jarvis assembled over 1,500,000 signatures to qualify a statewide tax measure that would finally end excessive property taxes – and protect home ownership for working families and middle class homeowners – namely, Proposition 13.

California Property Tax Relief: Facts and Case Studies

One story tells the tale aptly, with respect to the urgent, pressing  need California had for fair and equitable property tax relief… It  concerned a 56 year old criminal defense attorney by the name of Cameron Quinn, a Lido Isle resident, who lives there with his wife and 18-year-old daughter.

Beneficiaries of Proposition 13, Cameron’s parents bought his house in 1966 for $45,000. After they died, the house passed to Cameron and the benefits of Proposition 13 were his to take advantage of.  Last year their property taxes were $966 for a home assessed at $95,403. “Where else could we go where it would be less?” Mr. Quinn tells us, “The fact that the taxes are low is a salvation!” 

And of course this eventually included a property tax amendment called Proposition 58.  So with robust property tax transfers in California intact, and both official property tax relief measures working – to avoid property tax reassessment – beneficiaries and homeowners could take full advantage of parent to child property tax transfer opportunities to keep parents property taxes with unfettered ability to transfer parents property taxes; officially known as a basic parent-to-child exclusion from reassessment – all to avoid property tax reassessment on one’s primary residence.

Mr. Quinn calls Proposition 13 “a financial security blanket and a far cry from the Costa Mesa condominium where we first lived, with not much more than a television, a bed and an old piano.”

This home is more than just a product of property tax relief for Me. And Mrs. Quinn. This is where they went after their first date, where his mom, a piano-teacher, and friends serenaded the couple. And just as it passed from Mom to them, this home will be passed again from Dad to daughter. “We wouldn’t move,” said Mr. Quinn’s 57 year old wife Neeta Quinn, “This is where we’re going to live forever.”

CA Parent to Child Property Transfer & Buying Out an Inherited Home From Siblings

Avoiding Property Tax Reassessment on an Inherited Home

Avoiding Property Tax Reassessment on an Inherited Home for Californians

Most beneficiaries in California favor a parent to child transfer to avoid property tax reassessment.

As long as a transferred home is, initially, a primary family residence and the offspring receiving gifted or inherited property is moving in as a primary residence,  plus an  exclusion is claimed inside 12 months from change in ownership… remaining aware of the fact that the first $1,000,000 is not reassessed.

At any rate, despite certain limitations, the financial savings from this process  are genuine savings for beneficiaries inheriting property – avoiding property tax reassessment – and for many children of parents leaving a beloved family home to them.  This often makes the difference between being able to keep that family home, or losing it – frequently at a financial loss.

Plus, besides trust distribution to co-beneficiaries to keep an inherited home – also being able to take advantage of property tax breaks such as the right to transfer parents property taxes during a property tax transfer, with the legal right to keep parents property taxes basically forever… after inheriting property taxes through a standard parent-child transfer, and parent-to-child exclusion!

We also have to remember that, in 2022 California, a loan to an irrevocable trust, working in conjunction with Proposition 19, allows a beneficiary to buyout inherited property shares from siblings looking to sell their inherited property… thereby speeding up the trust distribution process. 

Moreover, an irrevocable trust loan also generates a much higher profit margin for beneficiaries selling their inherited property shares, by avoiding expensive home prepping for a sale, as well as avoiding a costly 6% realtor commission, expensive legal fees, and other pricey closing costs.  All in all, avoiding property reassessment, property tax hikes, and higher expenses  in general for all concerned.

When a trust loan is used to process trust distribution to co-beneficiaries, on average each beneficiary or sibling gets an additional $15,000 in distribution as opposed to selling the home to a conventional buyer. The family member keeping a family home also saves money – generally $6,500 or more per year in property tax savings by avoiding property tax reassessment on an inherited property.

That’s why many families inheriting a home from parents go to a reliable trust lender to be able to take full advantage of Proposition 19 tax benefits. Beneficiaries and homeowners continue to take advantage of Proposition 19 and Proposition 13 and basic property tax transfers in California and related tax breaks… keeping a low property tax base when inheriting a home – inheriting property taxes at a low rate from parents.

Saving beneficiaries many thousands of dollars, this is often a life-saver – and could, in many ways, be considered a final act of parental affection, from parent to child.

Understanding New Prop 19 Rules & Calculating Taxable Value

California Proposition 19 Property Tax Transfer

California Proposition 19 Property Tax Transfer

Parent-to- Child and Grandparent-to-Grandchild Transfers

Prop 58 & Prop 193 allowed parents, and in certain qualified cases grandparents, to transfer their existing property assessments of a “principal” or “primary” residence of any value  without  triggering property reassessment, which is generally required upon a change in ownership – even when real property was used as a rental property by [offspring] beneficiaries.

Prop 58 & Prop 193 enabled assessments of inherited residential or commercial property up to $1,000,000 – covering additional real estate being gifted to, or inherited by, an heir.

Now, under CA Proposition 19 (as of Feb 16, 2022), parents and grandparents can leave their home, with Proposition 13 base year value intact, to their children or grandchildren – as long as inherited property was the primary residence of the parents or grandparents – as well as the primary residence of  the beneficiaries moving into the home that is now being inherited…

Moreover, a beneficiary has plenty of time to move into an inherited home as a primary residence (12 months), plus a good deal of time to file a Homeowners’ Exemption (one year) to qualify for a parent-child or  exclusion.

A Prop 19 exclusion from reassessment of a primary residence of  a parent or grandparent, keeping a low property tax base when inheriting a home, plus all updated requirements, qualify beneficiaries for these types of base-year-value transfers; avoiding property tax reassessment and enabling these new homeowners with the right to transfer property between siblings through a loan to an irrevocable trust; plus all the usual property tax relief bells & whistles that go along with property tax transfer. 

Naturally, this includes the right to transfer parents property taxes and keep parents property taxes by inheriting property taxes generally through a parent-child transfer and parent-to-child exclusion (from paying currently reassessed property taxes).


Selling An Old Home – Distributing Cash Equally Among Heirs

A trust loan from a trust lender, to create equal cash distribution for co-beneficiaries looking to sell off their inherited property, can help those beneficiaries  become sole primary owners of an inherited residence.  Moreover, a primary residence homeowner in California over age 55 can transfer a low property tax base to a “replacement residence” (that is also a primary abode).

In order to qualify for a CA Prop 19 exclusion from reassessment (of your property taxes) – at the same time keeping your parents’ low property tax base – distribution of your trust funds to all beneficiaries have to be equal… especially when it comes to beneficiaries that are selling their inherited property shares to a co-beneficiary inheriting the same property. Each sibling must get the same amount whether it is cash, equity or other assets – to qualify for a Prop 19 exclusion from reassessment.

Many times the trust or estate will not have enough cash or other assets to make an equal distribution.  In these situations the trust or estate can borrow the money from a third party (not the person taking the property) and use the loan proceeds to pay off the other siblings’ share.

A Commercial Loan Corp calculator will demonstrate “how long it will take for the property tax savings to cover the costs of a loan from a third party. One needs to be fairly certain they will live in the home longer than the time it takes to break-even on third party loan costs or have a plan to transfer the low tax base to another property after the sale of the parents’ home.”

What to Look For in an Estate & Trust Lender

Trust Loans in California

How to get a trust loan in California

Retaining a Low Property Tax Base in California

Establishing and locking in a low property tax base helps you as a new homeowner, or beneficiary inheriting parental property, to minimize your property tax burden over the long-term. As most Californians know, to save on taxes it’s essential to utilize existing property tax relief tools to reduce taxes on inherited real estate… Tools that support property tax transfer and property tax breaks;, the ability to  transfer parents property taxes and keep parents property taxes as long as an inherited home remains a primary residence; inheriting property taxes.

Most residents believe expert help is essential, from a property tax consultant, a tax attorney, or a trust lender; and feel it would make very little sense to ignore this.  

What we should find in an experienced California trust lender, along with providing a loan to an irrevocable trust, is expertise guiding new homeowners, or beneficiaries inheriting a home, through the inheritance process – able to establish the low property tax base still possible under Proposition 13 – in conjunction with Proposition 19…

Proposition 19 is still clinging to the frayed edges of Proposition 58, as homeowners and renters alike show signs of buyers remorse, all across California, having voted for Proposition 19, thinking that their ability to avoid a property tax reassessment was the key ingredient… amidst confusion over the fine print concerning property tax transfers – hidden behind sentimental window dressing claiming to be tax revenue going mainly to firefighters, the elderly, and folks hindered by wildfires or other natural disasters and disabilities.

Californians are sentimental Westerners by nature, and what Westerners could possibly vote against the elderly and homeowners with severe disabilities!

At any rate, a loan to an irrevocable trust from a trust lender, working in concert with Proposition 19, in conjunction with a parent to child property tax transfer — better known as a parent-child transfer and parent-to-child exclusion, allows heirs and  beneficiaries to avoid a property tax reassessment – while also being able to buyout inherited property shares from siblings, for more cash than an outside buyer would offer.

Essential Trust Lender Tasks

Meanwhile, California real estate taxes are maintained at a reasonable level by Proposition 13, which limits real estate tax increases to 2% maximum per year. Proposition 58, Proposition 193, and Proposition 19 allow for this low tax basis to continue if real property is transferred to heirs from a parent or grandparent.

At any rate, a good trust lender should be able to complete the following tasks flawlessly and without issue:

1. Deciding which beneficiary will own the inherited property in question.

2. Determining how much money is needed for an irrevocable trust loan.

3. Funding a high six-figure or low seven-figure trust loan.

4. Distribution of an irrevocable trust loan, equalizing the amount of cash going to each beneficiary that is looking to sell off their inherited property shares.

5. Filing change-of-ownership, while keeping a legacy tax basis.

6. Mapping out how beneficiaries will repay a trust loan. 

Finally, a relationship with a trust lender is based on belief, and good faith, as all relationships are.  Plus results, which surface soon enough.

Saving on California Property Taxes in 2022

California Property Taxes

California Property Taxes

Using reassessment to your advantage

With all the talk in 2022 in California about losing money on property taxes from property reassessment – or accidentally triggering reassessment – we should all bear in mind that reassessment can also work in our favor, if property value drops. Of course, while you would rather see the value of your home increase, if there is a down-market and property value drops…. our property tax bill should drop as well.

Property tax consultants tell us if we transfer our property and trigger reassessment, we can reset the property tax basis and future increases to the lower value. If you have a taxable estate, you might want to may consider transferring property out of our estate. This will not only reset the property tax basis to a lower value, but also potentially reduce estate tax.

On the other hand, many homeowners favor a parent-child transfer to avoid property tax reassessment, as opposed to, for example, using an LLC approach or other lesser known processes – as long as the transferred home is, initially, a primary family residence and the heir receiving the property is moving in as a primary residence, plus the exclusion is claimed inside 12 months from change in ownership… remaining aware of the fact that the first $1,000,000 is not reassessed.

Buying Out Siblings’ Inherited Property With a Trust Loan

We also have to remember in California in 2022 that, working in conjunction with Proposition 19, a loan to an irrevocable trust allows a beneficiary to buyout inherited property shares from co-beneficiaries looking to sell their inherited property… thereby speeding up the trust distribution process.

A trust loan also generates a much higher profit for the beneficiaries selling their inherited property shares, by avoiding expensive home prepping for a sale, and avoiding a 6% realtor commission, legal fees, and other pricey closing costs. All in all, avoiding property reassessment and higher costs for all concerned.

When a trust loan is used to process trust distribution to co-beneficiaries, each beneficiary or sibling gets an additional $15,000 in distribution as opposed to selling the home to a conventional buyer. The family member keeping a family home also saves money – generally $6,200 or more per year in property tax savings by avoiding property tax reassessment on an inherited property.

That’s why many families inheriting a home from parents go to a reliable trust lender to be able to take full advantage of Proposition 19 tax benefits.  Beneficiaries and homeowners continue to take advantage of  Proposition 19 and Proposition 13 and basic property tax transfer and related tax breaks… keeping a low property tax base when inheriting a home – inheriting property taxes at a low rate from parents; the right to keep parents property taxes,  naturally, the parent-to-child transfer and parent-to-child exclusion, and as we have discussed here – buying a siblings’ share of inherited property or buying out numerous co-beneficiaries.  When you put it all together, saving a good deal of money on property taxes from the process.

Qualifying for CA Property Tax Measure Proposition 19

California Prop 19 Rules for Transferring Property Taxes

California Prop 19 Rules for Transferring Property Taxes

Background and Updated Details on Proposition 19

Proposition 58 – a wildly popular, successful property tax relief measure since 1986, was a life-saver for middle class homeowners and beneficiaries inheriting property taxes from Mom & Dad; from San Jose all the way to San Francisco and beyond – and was abruptly replaced after a rushed, slightly confusing  PR campaign; with a tax measure called “Proposition 19” – revising Prop 58’s flagship tax break, the “parent-child exclusion”.

Yet Prop 19, true to it’s advertising, added invaluable property tax exemptions for homeowners age 55 and over, for folks with severe disabilities, and victims of natural disasters and forest fires. Giving qualified homeowners the ability to transfer the assessed value of their primary home to a newly purchased or newly constructed replacement “primary residence” up to three times in a lifetime.

For heirs inheriting a home from parents, the bottom line objective for families is property tax transfer – a low property tax base of course; avoiding property tax reassessment; and naturally  the right to transfer parents property taxes and keep parents property taxes, when inheriting a home and inheriting property taxes from Mom & Dad… Having access to a comfortable stress-free parent-child transfer, and a parent-to-child exclusion from having to pay extremely high current property tax rates.  Although nothing is perfect,  California’s property tax relief, as it is now,  gives a foothold to consumer and homeowner  advocates who firmly believe the folks in power should go all the way, to pause CA property taxes to combat Pandemic impact  on the local economy.

Promotion of Proposition 19, albeit slightly misleading, said it all in the title – the “Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act” – more or less replacing the constitutional amendment Proposition 58… However – still maintaining the right to take advantage of a parent-child transfer, inheriting property taxes from Mom & Dad to keep a low property tax base with a parent-to-child exclusion – homeowners are still able to use Proposition 19 in conjunction with a loan to an irrevocable trust, to buyout inherited property shares from beneficiaries, giving inheritors plenty of time, up to 12-months, to move into an inherited primary residence.

Changes to Property Tax Relief Effective 2/16/2021 and 4/1/2021 

  Replacing Proposition 58 (est. 1986) and Proposition 193 (est. 1996) – limiting parent-to-child transfers and grandparent-to-grandchild transfer exemptions (Proposition 193).

  Replacing Proposition 60 (est. 1986) and Proposition 90 (est. 1988) that allowed home transfer exemptions for seniors; and Proposition 110 (est. 1990) allowing exemptions for disabled homeowners.

To qualify for property tax relief, residents have to file a claim with their County Tax Assessor by the time stated in the local county ordinance, or inside 12-months from the date of property damage caused by a natural disaster, a flood, earthquake, whatever – whichever is later. The loss estimate has to be at least $10,000 of current or “fair market” value to qualify for this type of property tax relief. Property taxes are reassessed and adjusted according to the level of damage.

Requirements to Qualify for Proposition 19 Approval

1. Proposition 19 permits property tax decreases by allowing families inheriting real estate to avoid property tax reassessment on a family home used as a principle or primary residence.

2. Only one child (heir) after property is transferred, and both parents before property is transferred over, have to be primary residents of inherited property, with plenty of time (12-months) to move in after the transfer.

3. Proposition 19 allows the transfer of a family home or farm between parents and their offspring, or grandparents and grandkids (as long as both parents are deceased) without triggering “change in ownership” based property reassessment – which is a property tax increase everyone wants to avoid.

At least one beneficiary has to reside in a primary residence, upon the purchase or transfer of a family home between parents and their children, in order to qualify for a property tax exclusion.

It’s worth reiterating that in order to qualify, a beneficiary inheriting real estate must be eligible for the “homeowners’ exemption” or “disabled veterans’ exemption“, applied within 12-months of the transfer or purchase. A parent also has to be eligible for homeowners’ exemption or disabled veterans’ exemption within 12-months of transfer or purchase. Using a home as a primary residence. And can still apply even without one of these exemptions by simply proving the home is a primary residence.  It is important to point out that there is no requirement for a family farm to contain a home that a beneficiary has to reside in.

The Tax Assessor’s Office has a calculator to help homeowners estimate their potential property tax savings from a tax exclusion.  

To Qualify for an Exclusion the sccassessor.org Website States:

The value limit is equal to the home’s taxable value at time of transfer plus $1 million. Any amount of market value exceeding the limit is added to the taxable value for the transferee. Partial relief is granted under the parent child exclusion up to the value limit; with the remainder assessed at market value.

A $1 million allowance will be adjusted annually beginning in 2023.The principal claimant or the claimant’s spouse who resides with the claimant must be at least 55 years of age at the time the original residence is sold. The claimant must be an owner on record of both the original and replacement residences.

Claims must be filed within three years from the date the replacement residence is purchased or newly constructed to receive full relief. Claims filed after the three-year time period will receive Prospective Relief only. Heirs must complete the claim form and meet the exemptions requirement within the first year following the date of transfer.

The exclusion for transfers between grandparents and grandchildren are the same rules as described above except in order to qualify the parents of the grandchild must be deceased. Special rules apply to multi-unit dwellings and mobile homes.

It’s well worth noting that all 58 California counties now have adopted, in accordance with Proposition 19 stipulations, an ordinance for disaster relief, available to owners of real property, business equipment and fixtures, orchards or other agricultural groves, and to owners of aircraft, boats, and certain manufactured homes.  It is not available to property that is not assessable, such as state licensed manufactured homes or household furnishings.

Leaving Heirs Property & Assets in a Trust to Avoid Sibling Conflict

Conflict Among Heirs Inheriting Assets

Squabbling among siblings frequently erupts right after a parent passes away… when the time comes to divvy up real property shares, investment and liquid assets, as well as cash in an estate.  Moreover,  this in-fighting often results in lengthy and expensive litigation.  

Therefore, to set the estate stage properly, to organize the equitable sale of all assets and valuables, to equally split real property, cash accounts, investments, and liquid assets… plus correctly establish productive, two-way communication among siblings prone to conflict and squabbling over money, with an objective, neutral party or familiar family lawyer to act as a mediator to resolve inheritance conflicts among siblings after a decedent has passed away.

However, when middle class parents pass away, leaving a home to several beneficiaries when there is little else to inherit, this frequently results in a heated conflict between one or more siblings who want to sell their inherited home, and the siblings who insist on keeping their family house along with parents’ low property tax base.  As we all know, this can lead to a protracted, bitter battle of wits and words.

An Irrevocable Trust: Working in Conjunction with Proposition 19

The one proven solution to this sort of struggle, to end the squabbling for good, is for one side, generally the beneficiaries looking to keep their inherited home, a loan to a trust to buyout siblings looking to sell their inherited share, buying out sibling property shares, with a sibling to sibling property transfer, avoiding property tax reassessment and keeping a low property tax base. 

Generally a high six-figure or low seven-figure loan from a trust lender to an irrevocable trust works in conjunction with Proposition 19, leaving beneficiaries who are keeping the family house with a Proposition 13 protected, low property tax base. 

This avoids the need to work with a broker or realtor, therefore avoids a 6% commission, legal fees, transaction charges, etc. – providing a good deal more cash to the beneficiaries trying to sell the home than an outside buyer would tend to offer, or could offer.

Resolving Sibling Conflicts with Trust Based Estate Planning

That is to say, thinking ahead to resolve sibling conflicts. Planning an estate with a concrete will and/or trust, with heirs in mind, prior to death can avoid many of the problems between siblings after a surviving parent passes away.

If a parent leaves concrete instructions in a trust and/or a will as to which sibling receives what in terms of cash accounts, real estate, personal property, investments, antiques, lucrative artwork, liquid assets, valuables, important jewelry; etc.

A wise parent will leave clear instructions how a house is to be inherited, or possibly how it is to be sold, and how the proceeds are to be divided. Some siblings may receive more than others; some or one may be disinherited. All of these decisions may result in bitter conflicts later on.

Planning in Advance to Thwart Mercenary Heirs 

Obviously, leaving an even share of assets, valuables, cash, and real property, in black and white,  in a will and/or trust,  would tend to avoid conflict – however this may not be what the decedent wanted.  And even if all inherited assets are split evenly, there are often greedy heirs who want more, and manipulate to get more. And this is where a trust loan buyout can come in handy, with the assistance of a trust lender.

A parent can leave a revocable trust that can be changed at any time up to death, placing property in the joint name of a parent and child so that a bank account, brokerage account, or real estate can pass automatically to children/beneficiaries when the parent dies – to avoid conflict.

Using a cordial executor or trustee for the estate who does not gain anything in any way can also help avoid conflicts, although sometimes they start them! So choosing the right person becomes a critical decision for the parent.