Does the 1978 Proposition 13 & 1986 Prop 58 still Work for Californians?

Does the 1978 Proposition 13 and 1986 Prop 58 still Work for Californians

Does the 1978 Proposition 13 and 1986 Prop 58 still Work for Californians

History Lesson on Property Tax Relief: Support & Opposition

2020 was an extremely motivated time for pent up anti property tax relief movement in California.  The deceptively entitled “2020 Proposition 13” went to voters on March 3, 2020. This tax hike would have increased California’s overall debt; compelling the state’s school districts to issue more debt, raising property tax bills all across the state. It did not pass, and to put it bluntly, was an utter waste of time and taxpayer’s money.

Unlike Proposition 13 passed by voters in 1978, this 2020 version of Proposition 13 would have doubled the debt caps that currently limit how much bond debt local school districts can acquire. The 2020 Proposition 13 caps on local bond debt would have been increased from 1.25% of assessed property value to 2% for elementary and high school districts, and from 2.5% to 4% for school and community college districts.

The extra property tax revenue from 2020 Prop 13 would have gone into pockets not into roads.  The  2020 Proposition 13 tax hike would have cost taxpayers $740 million per year for 35 years. The cash mainly going to construction-worker unions and contractors that hire everyone, with priority spending going to people working on projects in districts that have signed labor agreements that those in  power prefer.  As we know, the so-called 2020 Proposition 13 failed.

Prop 15 and the Near End of Commercial Property Tax Relief     

Even more dangerous for California, the 2020 Proposition 15 tax hike that was proposed to voters across all 58 counties would have removed the right for commercial property owners to avoid property tax reassessment.  This would have raised property taxes on all commercial and business property owners, which would have raised commercial store rents, office and apt. rentals, rentals on all business tenants would have gone up.  This would in turn have increased prices on all goods and services throughout the state of California.   Considering the outcome on middle class residents and working families, it would not have been a pretty picture.

Supporters of the Proposition 15 campaign raised over $67.6 million mostly from foundations and public service unions. The top three contributors were the Chan Zuckerburg Initiative, California Teachers Association, and SEIU California. Supporters say Prop 15 is a broad coalition of 1600 organizations launched by civil rights organizations, housing groups, parents, teachers, nurses, firefighters and community-based organizations who advocate for equality and justice for communities of color

Opposition to Proposition 15 Campaign has raised over $73.1 million mostly from land developers, agricultural interests and golf and country clubs. The largest donor is the California Business Roundtable Issues PAC that has contributed more than $38 million to the No on 15 Campaign.  The Business Roundtable’s biggest donors are New York-based Blackstone Property Partners who gave $7 million and Michael Hayde, CEO of the Irvine real estate investment firm Western National Group, who gave $4.5 million.

Despite the massive effort towards promoting and passing this tax hike, voters were not sufficiently confused or conned into backing the bill en mass… and they rejected this tax increase on commercial properties, supposedly depriving the California school system of what allegedly could be a significant source of consistent revenue.  Although the true intended recipients of this extra commercial property tax revenue remained under questions… and backers of Proposition 15 – the first major effort to cut into beloved property tax relief afforded by Proposition 13 since it was voted into law in 1978 – finally conceded defeat, and California heaved a statewide sigh of unified relief. 

The question remains – would economic collapse of the statewide   consumer base and working family structure in California have been worth a few extra dollars for the educational system, which is doing relatively well as is?

Last Minute Promotion of Snake Oil Sales to California Voters

Motivated, determined and relentless opponents to property tax relief in California came up with a last minute tax hike measure, Proposition 19 – and the CA Association of Realtors shoved $35 Million at the CA Legislature to promote this unusually deceptive bill, after suffering significant tax hike losses.  They managed to confuse enough voters with disingenuous and deceptive public relations to get Proposition 19 passed – by a hair – and watered down the critical Proposition 58 “parent-to-child exclusion” tax break for middle class beneficiaries and new homeowners. 

This weakened California homeowners’ ability to avoid property tax reassessment without obstacles. So Proposition 19 managed to limit parent to child transfer rights to a one-year window, and only as a primary residence.  No longer could investment properties avoid property tax reassessment.

So the ability to transfer parents property taxes, when inheriting property taxes from a parent, is now on a tighter path. We can still keep parents property taxes but they made it more challenging, in the midst of a Pandemic no less.  Avoiding property tax reassessment and establishing a low property tax base; as well as buying out a sibling’s share of inherited property, meaning the transfer of property between siblings or sibling-to-sibling property transfer – still exists, yet with a few more obstacles to remain aware of. 

We can still transfer parents property taxes in California when  inheriting property and inheriting property taxes from a parent, and remain able to keep parents property taxes on any property tax transfer, such as the parent to child transfer or parent to child exclusion.  It’s just not quite as simple or easy as it was prior to advent of Proposition 19.

Thankfully, enough property tax breaks survived in California to enable property owners to still save significantly on property taxes. Californians can still get a trust loan from a trust lender, working alongside Proposition 58, to buyout a co-beneficiary when inheriting property taxes from a parent – and, most importantly, to establish a low Proposition 13 level property tax base, basically forever for an inherited home, for example from a niche firm like Commercial Loan Corp.  

Most Californians struggling financially from Pandemic shutdowns and health outcomes should research niche blogs like this one, or   info sites like EdSource.org who looks  at both sides of Proposition 15 for example, or SiliconValleyandBeyond.com who examines property taxes and Proposition 19, among other related issues. As well as state government websites such as the  California State Board of Equalization.  The more we know about how to use trust loans and these unique tax breaks, plus other property tax reduction solutions we have access to, the better off we’ll all be going forward.

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…

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!

CA Proposition 58 and Prop 193 Exclusions

Parent to Child Property Tax Transfer in California

Parent to Child Property Tax Transfer in California

Based on their recent efforts, how do the folks running the state of California, in the Legislature, think that adding property taxes will affect all these working families? Do they even consider how further unraveling property tax relief would affect the California economy as a whole? Does it ever occur to the politicos in the Legislature that going further in the direction of eliminating property tax breaks would literally be a social and financial disaster for the state as a whole?

Since Proposition 58 (as well as Proposition 193 concerning the “Grandparent to Grandchild Exclusion”) is such a critical element holding up property tax relief in the state of California, we might as well take a quick, very simple high-level look at how this all works. To take advantage of Prop 58, certain eligibility requirements must be met. For example, eligible children under this proposition include:

a) Children born of the parents in question
b) Stepchildren
c) Sons-in-law and daughters-in-law
d) Children adopted under the age of 18
e) Children of a child of grandparents (regarding Proposition 193)

Propositions 58 and 193 exclude three types of property transfers, avoiding property tax reassessment at current high market rates:

1. Transfer of a primary residence: The assessed value of a primary residence is eligible for reassessment exclusion, or exemption.

2. Transfer of property through gift, sale, or inheritance: Parent-to-child transfer through a trust will qualify for an exclusion of property tax reassessment.

3. The parent-child exclusion can only be used if the “transferee child” uses the home as the child’s primary residence, and files for the homeowner’s exemption for the property. The parent-child exclusion will not be available if the home is used as a vacation home or is rented out by the children. If the home is transferred to more than one child, they would all have to live together in the home as their primary.

4. A parent can only shelter $1 million of increased value from reassessment. Any appreciation above that will be added to the property tax assessed For instance, if the primary residence is currently assessed at $500,000 but is worth $1,500,000, the child receiving the home and using it as the child’s primary residence will keep the same property tax assessed value of $500,000. However, if the home is worth $3,000,000 and not $1,500,000, the $2,500,000 appreciation will result in an added $1,500,000 assessment; the child’s new property tax assessed value will be $2,000,000 ($500,000 current property tax assessed value + $1,500,000 of “excess appreciation”). This new limitation also applies to a family farm.

Proposition 19 eliminates the second current alternative completely. As of Feb 15, 2021, there will no longer be a Parent to Child exclusion for a transfer of any property other than the parent’s primary residence and a family farm. Although you can still get the benefit of Prop 58 and an irrevocable trust loan if you require that type of financing.

Proposition 58 does not automatically apply to each parent-to-child transfer. To receive the full benefit of Proposition 58, you are required to file within 3-years of the transfer of property ownership.

There are several forms you must file to take advantage of property tax reassessment exclusion. They are Proposition 58 Form BOE-58-AH: Claim for Reassessment Exclusion for Transfer Between Parent and Child; or Proposition 193. Form BOE-58-G: Claim for Reassessment Exclusion for Transfer Between Grandparent and Grandchild.

This completes a very simple, high-level view of what Proposition 58 is all about. Once you understand all that, the next step is to enlist the help of a trust lender to get approved to be able to take advantage of Prop 58 and an irrevocable trust loan for funding to equalize the finances between beneficiaries if some wish to hold on to inherited property while others are looking to sell out to outside buyers.

From that point onward, the next step is to make use of the trust fund loan process, if you wish to equalize financing between you and your siblings or co-beneficiaries, to retain inherited property from your parents and buyout property shares inherited by a sibling, or several co-beneficiaries. You can then own your inherited home without the encumbrances of co-beneficiaries to be concerned with.

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.

Prop 58 Loans

Prop 58 Loans

Prop 58 Loans and Loans to Equalize Trusts

It has been an interesting piece of California history, concerning people who have been  involved in the struggle for, or against, Proposition 19 in 2009–2010 which was not voted into law… as well as the next version of Proposition 19 in 2020, which was voted into law, just barely.

Moreover, Proposition 19, 2020 was promoted in a rather deceptive and  confusing manner, along with a measure called Proposition 15, which did not pass or, as you know – commercial property owners in California would no longer be able to avoid property tax reassessment.

As you also probably know, Proposition 19, 2020 managed to revise certain property tax breaks within Proposition 58, such as the “Parent to Child Exclusion, or, as tax attorneys like to call it, the “Parent to Child Exemption”.

At any rate, there was far too much focus on the recreational use of marijuana surfacing during the 2009–2010 version of CA Proposition 19. This battle descended into a petty conflict involving decade-old personal bias and social prejudice characterizing marijuana as a “socially destructive, addictive drug” (which it apparently is not, according to pharmacological experts) and placed in the same class as crack cocaine or meth-amphetamine, which are indeed socially and personally destructive drugs.

It does seem that the real purpose of Proposition 19 in the 2010 version, away from the grey area of “recreational use of marijuana” which the debate became mired in – was to try to generate $1.5 billion or more for state violent crime fighting needs.  Due to a great deal of personal bias, this never happened. Which is unfortunate, as the state could have used the extra money for legitimately battling violent crime associated with genuinely harmful drugs; as opposed to rather benign couch-potato pot smoking. 

Everyone who owns property in California regarded Proposition 58, voted into law Nov 4 of 1986, as untouchable, sacrosanct, a political third rail not to be touched. It has served to protect homeowners whose debt is at or exceeds $8,500 in additional property taxes, while settling financial affairs after a parent, who has left property to heirs, has passed away.  Proposition 58 also protects a property tax benefit called a “Parent to Child Exclusion” or Exemption, as we have mentioned… allowing beneficiaries inheriting property to avoid property tax reassessment at current market rates.

Moreover, Proposition 58 allows beneficiaries who wish to keep inherited property in their family to buyout co-beneficiaries’ property shares, through a trust loan, and helps those looking to keep their inherited home also retain a Proposition 13 protected low property tax base that their parents paid.

With the advent of Proposition 19, after a long rather disingenuous marketing campaign, middle class families woke up to realize that some of the benefits they thought were fully protected have been watered down; that you will need to move into the house you inherit from parents within a year, as a primary residence, or lose your Parent-to-Child Exclusion.  So it’s still there… but you have to keep an eye on the calendar to avoid losing the tax break altogether. 

So all of a sudden, after both Prop 15 and Prop 19 were proposed… California property owners began to worry, for the first time in decades, about possibly losing the right to keep parents property taxes for themselves, at a nice low rate…It is unthinkable, as expensive as California is, with income tax and other taxes as high as they are – to even consider that we might ever lose our right to a property tax transfer from parents, at low Prop 13 rates; or transfer of property between siblings.  Fortunately for California, this did not occur.

After Proposition 19 was passed, Californians were extremely relieved to see that they would be still have the right to get a loan to an irrevocable trust, in conjunction with Proposition 58; to be able to buyout property shares from co-beneficiaries, as the same simple transfer of property between siblings – known as “buying out siblings’ property shares” or a “sibling to sibling property transfer”, when co-beneficiaries decide to sell their inherited property to an outside buyer.

It was most likely due to notable professionals who supported property tax relief and Prop 58, that Proposition 19 was prevented from going too far. This can be verified at fact-based property tax  blogs like this one, Property Tax Transfer,  and the new Op-Ed oriented micro-site, Loan To A Trust, specifically addressing issues, opinions and fact-based information on Proposition 13 and Prop 58 at Websites belonging to real estate attorneys supporting CA property tax relief, such as property tax specialists like Michael Wyatt and his team of specialists. And certainly thanks to Prop 58 experts and trust lenders with applications for a trust loan, for transfer of property between siblings… that look something like this: https://cloanc.com/apply-online
 
It goes to show us that with some stiff opposition to unreasonable tax measures looking to squash property tax relief in California – even with millions of dollars from the California Legislature and organizations supporting special interests like realtors, such as the CA Association of Realtors (C.A.R.), conspiring tax measure that  attempt to unravel Proposition 58 and/or Proposition 13 can be stopped.  Perhaps not completely; yet at least to a good degree.

PART TWO: Parent to Child Exclusion From Reassessment

California Parent to Child Exclusion From Property Tax Reassessment

California Parent to Child Exclusion
From Property Tax Reassessment

And yet, until these changes to property tax relief are repealed, let’s be thankful at least that, going forward, beneficiaries inheriting property directly from parents will still be able to retain Proposition 58’s parent to child exclusion from property tax reassessment (at full or current market value), as long as those direct beneficiaries move into an inherited property as a primary residence, within 12-moinths after the passing of the parent leaving  that property as a gift, a sale, or an inheritance.  

This is a difficult matter to overcome without some careful planning… and this is certainly one component of Prop 19 that was, shall we say, “under-played”, or actually hidden from voters, prior to Nov. 2020.  The prevailing thought is that this will perhaps be repealed in the near future once voters actually experience the reality of these changes to Proposition 58, whether they voted for change or not.

Yet, whether we like it or not, all of these revisions do unravel long-standing tax benefits protected by Proposition 58 concerning the parent to child exclusion as well as trust loan enabled sibling to sibling property transfer, buying out property inherited by siblings; or Proposition 193, with regards to the grandparent to grandchild exemption; passed overwhelmingly by voters in California in Nov. of 1986 and March 1996, respectively, allowing parents to transfer their property tax basis of a primary residence ) to their children; plus up to $1 million of assessed value of other property – namely $1million of the Proposition 13 values on rental properties or other investment properties passed to heirs, not based on fair market value; and effectively allowing far more than $1million of property value to transfer while retaining the lower tax bill.

Even though the California Legislature and California Association of Realtors may be more interested in funding unfunded local government pensions, footing the bill for a few school programs, and getting some more homes into the market for sale – it’s not in question to any reasonable person, without a financial or political axe to grind, that Proposition 13, Proposition 58 and Prop 193 have saved heirs thousands upon thousands of dollars every year, that they would have otherwise been spending needlessly on vastly over-priced property taxes.

Not to mention the truly  excellent sibling to sibling property transfer benefit, buying out inherited sibling property – which is always Proposition 58 & trust loan enabled, to buyout property inherited by co-beneficiaries.  Noted attorney Devin Lucas, one of the most knowledgeable proponents of Prop 13, Prop 58 and 193, and California property tax relief in general, which he summed up brilliantly in Oct. of 2020.  Mr. Lucas offered some real-world examples to illustrate the practical importance of these tax breaks for families, as follows:

“Due to the tremendous benefits of Proposition 13, many long term owners continue to pay property taxes based upon their original purchase price (or price as determined when the proposition was enacted), with annual increases not to exceed two percent, regardless of current value. This can be especially beneficial in areas such as Newport Beach, Laguna Beach, Costa Mesa, Orange County and other coastal communities that have seen incredible growth in property values.

For example, assume a parent’s home in Newport Beach is currently worth $2,500,000. They purchased the home long ago for low a low six-figure amount and due to the enormous benefits of Proposition 13 are paying about $3,500 a year in property taxes. If the child were to purchase a home for $2,500,000 today, that would equate to a $25,000 annual property tax bill (assuming one percent, not including various municipal bonds and other taxes commonly found on property tax bills). Transferring the property tax basis of the parent’s home, and therefore that $3,500 a year bill, just saved this hypothetical child $21,500 a year in property taxes. $21,500 a year, for as long as they own the home.

Principal residences have no cap in value, all other property, such as investment properties or second homes, have a benefit cap of $1 million, in which case a mother / grandmother and father / grandfather can combine their exclusions for a limit of $2 million. If the property is worth more than said caps, then a new blended property tax basis will be configured by the county…”  

Other property tax breaks, Propositions 60 and Prop 90 (allowing homeowners over the age of 55 to sell their home and purchase a replacement home of equal or lesser value and maintain the property tax basis of their original home) cannot be combined with a gift or sale of the original home to a child under Proposition 58, which thankfully still works well in concert with a trust loan, buying out inherited sibling property.

Fortunately, Proposition 193 is also intact, allowing grandparents to transfer their current tax-basis to grandchildren. The wonderful thing, still, is that these property tax benefits can always apply to a gift, sale or hybrid of the two and can amount to enormous property tax savings.  And that is truly  what this is all about.

Transferring A Parent’s Property Tax Rate & Prop 58 Loans

Transferring A Parent's Property Tax Rate & Prop 58 Loans

Transferring A Parent’s Property Tax Rate & Prop 58 Loans

This “parent to child exemption” has saved so many  beneficiaries, homeowners and commercial property owners, thousands  of dollars;  making it possible to put a few dollars away in the bank every year, with the ability to avoid property tax assessment… and transfer parents property taxes at a reasonably low base rate — having the right to keep parents property taxes at the low tax base they were accustomed to paying; i.e., inheriting property taxes that remain low.

Otherwise — very few middle class homeowners could afford to keep an inherited home. They’d have to sell out, given that most of these estate heirs or trust beneficiaries have their own home to maintain and pay taxes on! Or, beneficiaries can still go to a blog or Website that is deeply focused on Proposition 58 and Proposition 13, trust loans and estate property tax reduction like, for example  Property Tax Transfer Trusts.

Or you can conduct research on some other sites focused on Prop 58 and unique, consistently  effective uses of intra-family trusts as  trust loans, generally to buyout property shares owned by co-beneficiaries of the same estate or trust — along with locking in a low property tax base by avoiding CA property tax reassessment at current, typically  high market values, such as https://cloanc.com/tag/california-prop-58

Exactly why many of us think other states, particularly expensive  states, should be looking into property tax relief for all property tax transfer scenarios, involving property tax breaks like the parent to child transfer of inherited property, similar to tax breaks avoiding CA property tax reassessment at current market value. 

Realistic examples of high-tax states that desperately need property tax relief are, for example, states like Massachusetts, or New York, Texas, or Pennsylvania… States like this should all have a property tax exclusion or exemption to protect middle class homeowners  from property tax evaluation at current market rates… giving residential and commercial property owners the right to avoid property tax reassessment every year.  Establishing lower property taxes for all property owners, including landlords; which would  affect  apt. building and commercial store rentals all across any major state… thereby impacting the finances of middle class residents and commercial property owners in an extremely positive fashion.

The surprising reality in California is the fact that so many homeowners do not understand property tax transfer, nor do they understand the use of trust loans and trust lenders, when inheriting a property you want to keep, and need a trust loan to pay off beneficiaries who had insisted on selling their shares in the inherited property, to equalize cash for them in the process, so they don’t need to sell, often below fair value, to a third party.

People that do not understand any of this need to do a little research, on info blogs like this one; or on Websites that delve into Proposition 58, and how property tax transfers and trust loans work, such as the  Trust and Estate Loans Website… or at one of the transaction oriented sites like Commercial Loan Corp  This gives nervous  beneficiaries a great deal of accurate information to help them avoid estate conflicts with co-beneficiaries… typically siblings.  So for once, the inheritance and estate process becomes a win-win experience for all concerned! If you need assistance with a Trust or Estate Loan, you can reach Commercial Loan Corporation at 877-464-1066. They can assist you with the process and answer any questions you might have on the topic of Parent to Child Exclusion from Reassessment and transferring the property taxes from a parent to a child when a trust is involved. 

PART THREE: Property Tax Relief Fights for Its’ Life in California…

As we all know, the Coronavirus crisis is not abating in many states – causing severe and consistent unemployment, and overall economic uncertainly.   Certain states are floundering more than others, without any federal support of any kind, even PPE – thereby costing tens of thousands of families the lives of loved ones. 

With millions of jobs initially put on hold – jobs that were placed on  “furloughed”  status or were standard “lay-offs”… are still in question, as far as resurgence is concerned.  Regrettably, it’s impossible to determine the exact number of jobs lost, as some return: whereas others do not.  Therefore, constant fluctuations make permanent calculations difficult to nail down. 

Making matters even more challenging, the federal government historically calculates “unemployment rates” by adding up the number of workers signing up for unemployment checks;  and deduce an unemployment rate in this fashion. However, once workers stop getting  unemployment checks they somehow magically disappear off the grid.  As if they somehow were never in the system.

It would be safe to say that unemployment, nationally and statewide, remains at critical levels.   And yet California is still the only state in the union that provides middle class residential and commercial property owners with genuine property tax breaks.  

And this is exactly what every state in America needs right now, with unemployment and Covid still spiraling out of control.  Lowering property taxes would surely loosen up some cash to help working families buy food and maintain some decent health coverage, plus put some money away for emergencies. 

If we were able to get property tax measures passed in most states, similar to the mega-popular tax breaks California home owners and commercial property owners enjoy, the overall positive cumulative affect on American tax payers would be significant. Folks would be able to easily transfer parents property taxes, and keep transfer parents property taxes, or buyout while inheriting property taxes at a low base rate. 

Especially in times like this – shouldn’t we all have access to property tax relief like this?  An intra-family loan to a trust, using Proposition 13 and Proposition 58 type of property tax transfer benefits and tax breaks, with parent to child transfer or as law firms refer to it – parent to child exclusion, or exemptions.

Do some research and push your Beltway representatives in Congress to put together some bills like California has passed to help home owners and commercial property owners.  And you can use the Covid crisis for added motivation.  This is covered on  informative, accurate niche Websites such as Commercial Loan Corp.  

An intra-family loan to a trust in conjunction with Proposition 58, or Prop 193, makes it possible to maintain a low property tax base basically forever upon a beneficiary buyout of sibling property shares, or as realtors call it, “the transfer of property between siblings”, and “lending money to an irrevocable trust“ – typically from an irrevocable trust loan lender.

While you’re at it, take a look at the CA State Board of Equalization to find out how all this works, or research niche info blogs such as  this one, Property Tax Transfer…  Plus other sites focused on property tax breaks for Californians. And let’s be frank… Living in that state, although there are great benefits, is admittedly expensive – in relation to many other states. 

States like New York, Texas, New Jersey, Connecticut, Massachusetts… are all expensive states to reside in.  With zero property tax relief or significant tax breaks of any kind – unless you’re a multi-millionaire or billionaire.  Then you get nothing but legislated V.I.P. tax cuts. However,  firms like Commercial Loan Corp, or Paramount Property Tax Appeal,  provide V.I.P. property tax breaks or V.I.P. personal business and  property tax reduction to everyone…. regardless or income or overall net worth.