Tag Archives: California State Board of Equalization

New Property Tax Relief Laws & Belief in the CA Legislature

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Property Tax Transfers

Property Tax Transfers

Can California rely on Property Tax Exclusions from Prop 19?

Despite the growing waves of criticism and anxiety from residents in California, regarding Proposition 19, given all the cheer-leading from the California realtor community, more or less led by the CA Realtor’s Association – state sponsored public relations continues to convince us how fabulous Proposition 19 truly is.

We are constantly reminded that, despite certain obvious limitations affecting homeowners and beneficiaries inheriting property from their parents, we do have new property  tax exclusions from Prop 19.   Proposition 19 is providing us with tremendous property tax breaks which did not exist previously, with Proposition 58 tax relief.

Truth?  Publicity?  Or happy talk… 

Supposedly, despite new property tax exclusions from Prop 19,  the state will see an extra yearly revenue of a billion dollars plus, to help schools in towns and cities – although the California State Board of Equalization (BOE) is a little short on concrete specifics and details, in terms of how much revenue is actually expected to come in overall from these new property tax laws; and specifically how much money will go to fire departments, and how much will be allocated to help seniors and the elderly… and homeowners with serious infirmities. 

Moreover, Proposition 19 also seems to be rather fuzzy, with respect to anticipated property tax revenue that is supposedly going towards balancing budgets – possibly with provisions to step up the state’s recovery from Pandemic driven financial losses.

Additionally, beyond property tax exclusions from Prop 19 that we already know about, and hope will be consistent – extra tax revenue from Proposition 19 is supposedly expected to furnish all sorts of other “significant added protections” for CA residents – although proponents of Prop 19 as well as BOE are extremely vague, as far as articulating precisely what these “protections” might be every year.  Again – fact based info dissemination?  Or simply PR happy talk…

Prop19 revenue for city and county fire departments & schools

Proponents of Proposition 19 singled out supporters of Proposition 13 property tax relief as creators of “tax schemes” and “deceptive practices” – “costing local governments and schools up to $1.5 billion every year” – without describing exactly what those “tax schemes” and “deceptive practices” actually are… And what those numbers that  supposedly cost the school system a small fortune really look like – above and beyond vague projections designed to scare tax payers half to death.  

We also frequently hear about “unfair tax loopholes” used by supposed “East Coast investors” and “celebrities” or “wealthy non- California residents” as well as “trust fund heirs” – who are perpetually unnamed, wealthy property owners, who supposedly avoid paying “their fair share of property taxes on vacation homes, income properties, and beachfront rentals they own in California.”

An obvious reference to the Lloyd Bridges family, the only family in 40 years that has been named as property tax perpetrators of the above so-called violations, whose heirs happened to inherit a nice beach home, using Proposition 13 to cap property taxes at 2%… subsequently renting the home out at $16,000 per month to vacationers from out of state. (As opposed to residing in the property as a “primary residence”.)

No other family has ever been named and singled out as using Proposition 13 for such “nefarious purposes”.  It appears that the justification for Proposition 19 limitations were based on this one family… this one inheritance.

Maintaining the spirit of Proposition 13 and Prop 58

Proponents of Proposition 19 insist that their favorite tax measure will “continue to preserve the intent of Proposition 58 and Proposition 193” – keeping family homes affordable when parents and grandparents pass on their family home to children and grandchildren to use  as a  “primary residence”. 

As we all know, this is partly true, and where  limitations are concerned… partly not true. Fortunately, beneficiaries can still     use a parent-to-child exclusion in conjunction with Proposition 19.

When inheriting property while keeping a low property tax base,  smart beneficiaries are still able to buyout property tax shares from siblings, with advice from a Property Tax Consultant, and funding from a Trust Lender such as Commercial Loan Corp.

We continue to hear about the $1 billion per year in Prop 19 generated revenue that is going to fire departments and unions, school systems and local governments.  We also hear about that revenue somehow being used for emergency services, public hospitals, general healthcare, homeless folks, and housing projects. However… again, no specifics. Just general allusion to a lot of hopeful initiatives. 

At the same time Californians hope that they will be able keep parents property taxes, and take advantage of property tax transfers to retain a low property tax rate from this parent-to-child transfer upon inheriting property from parents, while inheriting property taxes… to avoid property tax reassessment – typically through a parent-child transfer.

Homeowners and beneficiaries are waiting to see what specific applications will be readily available to them:

• to limit property tax increases for victims of wildfires, replacing damaged or destroyed property; limiting damage from wildfires on homes through supposed funding for fire protection and emergency response.

• to cap property tax increases on family homes used as a primary residence by protecting the right of parents and grandparents to pass on their family home to children and grandchildren as a primary residence.

• to take advantage of supposedly “thousands of housing opportunities” by making homes available for first-time homeowners and families in all 58 counties across the state of California.

Ultimately, Californians are taking for granted that there is a cap on property tax increases for primary residences for homeowners over 55 years old, people with severe disabilities, and victims of natural disasters or wildfires by removing county restrictions – apparently allowing these residents to locate a home that “better fits their needs”.

State leadership may be asking residents to stretch their trust a long way; without any iron-clad guarantees. Just a long list of top-down assurances. And residents as well as estate attorneys and tax lawyers, as well as accountants, are wondering, going forward into a murky future, what they can question… and what they can really rely on.

Inheriting a Home and Keeping the Property Tax Base Low with Proposition 19

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Inheriting a Home and Keeping the Property Tax Base

Inheriting a Home and Keeping the Property Tax Base

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

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

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

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

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

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

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

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

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

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

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

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

Transferring Your Mom’s Low Property Tax Base Via Prop 19

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Transferring A Parents Low Property Tax Base with California Prop 19

Transferring A Parents Low Property Tax Base with California Proposition 19

It’s certainly nice and politically correct of the California Governor to let resident companies and families pay property taxes a few weeks late;   with millions of people unemployed or under-employed — with mouths to feed and bills to pay.  Politically correct, with nice optics… But not terribly effective, let’s face it.

How about just not collecting property taxes as long as the pandemic is literally killing our economy. How about something with a material, profound affect, not just nibbling weakly around the edges.  However, California still has more property tax relief options than any other state in the union, for middle class homeowners.  Wealthy residents  have countless tax cuts and property tax breaks.

At any rate, the country is moving rapidly towards a vaccine. Fine. But if the Governor of California and his team really want to move the needle for middle class residents, and genuinely help working families survive the disastrous pandemic economic effect — why don’t they update and bolster the benefits offered by Proposition 19, which is already in place?  No need to re-invent anything to move this to the next level! 

As the pandemic continues to diminish the California economy — the powerful realtor community and the State Legislature are promoting status quo — not really digging in and trying hard to  upgrade and improve the property tax breaks that are already in place.  They seem to have no appetite at all to make  the lives of millions of middle class homeowners more secure — with hope for better days in the future.  They seem instead to be far more interested in making the realtor community and the Legislature more secure, more comfortable, and a great deal wealthier regardless of the fact that these partisan groups are already swimming in money! 

However, despite the Legislature’s indifference to the financial problems of the middle class, Californians still have property tax relief options such as the right to keep parents property taxes, and transfer parents property taxes upon inheriting property and inheriting property taxes at a low base rate, as per Proposition 58 which is really now Proposition 19… Plus of course Prop 13 — but the walls may close in on us fast if we allow the powers that be to return with anything like the infamous commercial property tax Proposition 15; which would have increased prices across the state on virtually all goods and services… cutting deep into the middle class spending and tax paying machine that basically keeps the state economy alive. 

Many of these middle class residents stay up to date on  their property tax options, with websites such as the official California State Board of Equalization site.  As well as by researching inheritance solutions and property tax relief on property tax blogs like this one, Property Tax News;  plus going to websites addressing Prop 13 and maintaining a low property tax base… basic property tax breaks that allow resident to spend less and save more, like Trust and Estate Loans, and crucial updated information and news on Proposition 19 at the Howard Jarvis Taxpayers Association.  

Residents  these days also look seriously at options  and solutions to property devalued by the affects of the pandemic… 

“The Covid-19 / Coronavirus pandemic has severely impacted the commercial and investment real estate markets in California. This has placed a significant burden on many property owners. The good news is, property tax relief is now available.  One of the property tax relief measures available is for when “restricted access” to properties causes a loss of market value of those properties. The other is reductions in value due to damage, destruction, depreciation, obsolescence, removal of property, or “other factors causing a decline in value“.  An effective method of supporting lost value due to restricted access or damage to a property, is to measure the loss of  revenue  from periods before and after the event causing the decline of the property’s performance.“

New homeowners in California also research property tax breaks at  established finance firms that are focused on options that involve Proposition 58, and now Proposition 19, maintaining a low property tax base through a loan to an irrevocable trust, such as critical financing options for California residents furnished by Commercial Loan Corp — again, working hand-in-hand with Proposition 58 having morphed into Proposition 19 for all intensive purposes.   For  all commercial and residential property owners; enabling beneficiaries and homeowners to lock in a secure, low Proposition 13 property tax base, while buying out co-beneficiaries that have inherited the same property, yet are committed to selling their property shares — and who ultimately walk away with far more money in their pocket from irrevocable trust funding, rather than simply accepting cash from a third party buyer!

Property tax options that involve going through a trust loan are important to tax attorneys and sophisticated beneficiaries, as these specific property tax options are always more profitable; as well as maintaining a low property tax base with a property tax transfer, basically for the life of the property, with a standard parent to child transfer, or parent to child exclusion from paying reassessed property taxes; as long as requirements for Proposition 58 — now Proposition 19 — have been met.

We so have effective options to turn to in California… So we shouldn’t complain too much even though new property tax relief changes have created some challenges.  We also have a lot to be thankful for.

If you are curious how much you might be able to save by taking advantage of California Proposition 19 or Proposition 58, fill out the short form located here for a free estimate. 

CA Proposition 58 and Prop 193 Exclusions

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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.

California Proposition 58 & Proposition 19 Lenders

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California Proposition 58 and Proposition 19 Lenders

California Proposition 58 and Proposition 19 Lenders

A Period of Uncertainty and Stress in America

We all know it’s a period of time right now in America of great uncertainty, insecurity and stress… affecting many families, creating enormous tensions, frequently financial…  Even affecting family estates, when a parent passes away; and where ‘will contests’ can be a real problem for families – for example, sibling-A believing she/he should be getting more than sibling-B;  so on and so forth.  We see a lot more of this sort of family conflict lately, over the past few  years, than ever before.

Although we do, thankfully, have solutions in California to prevent such conflicts from descending into disaster. Some of these solutions are tied into getting approved for CA Proposition 58 so heirs can avoid property tax reassessment; as well as classic CA Proposition 13 property tax breaks, for California property owners looking to work around new Proposition 19 property tax obstacles that force homeowners to move into inherited property within one year or lose their “Parent to Child Exclusion”. This can be a stunning loss of property tax relief; unless we meet it head on, and are able to  successfully work around it. 

It seems it’s still possible to take advantage of the property tax transfer benefit from parents, with the ability to keep parents property taxes while avoiding property tax reassessment of course. Despite newly passed obstacles, we can still transfer parents property taxes when inheriting property – bottom line, inheriting parents property taxes at a low base rate the way Proposition 13 was intended!  

Sibling-to-Sibling CA Property Transfer

Firms like Commercial Loan Corp can help solve estate conflicts between beneficiaries; making it possible for us to buyout siblings with a “sibling to sibling property transfer”, siblings who want to sell their inherited property shares, while allowing us to keep the same mutually inherited property from parents – with a trust loan, at that low base rate.  As long as we get approved for Proposition  58, heirs can avoid property tax reassessment, as the California State Board of Equalization explains.  Or possibly at a niche property tax info blog like this one, Property Tax Transfer. 

As long as everyone gets the cash they were expecting with a trust loan, and/or end up with a nice low property tax base… everyone ends up in a win-win happy sibling scenario. As long as the ‘will contest’ can be resolved to some degree, and direct communications between siblings doesn’t completely fall part.

These conflicts have often dominated family structures, so much so that some family groups actually splinter apart… with some family members literally leaving California for ever.  Additionally, Southern California home prices are currently at record levels, which doesn’t help. 

Rising Cost of Real Estate, Property Taxes & Day to Day Living Causing Many Homeowners to Leave California 

Because of hyper expensive home pricing many people are moving from California to nearby states where cheaper real estate can be found, in decent middle class or lower middle class neighborhoods; including Texas, Nevada, Arizona, and in some cases Oregon and Washington, according to Jordan Levine, an economist at the CA Association of Realtors (C.A.R.), who says California residents leave to get out from under general California inflation and an increasingly expensive overall lifestyle that many middle class families simply cannot afford to sustain – in terms of buying a home, feeding a family, maintaining numerous cars and insurance plans, health coverage expenses; schools; you name it. 

It is ironic that C.A.R. (California Association of Realtors) produces a report describing elevated living expenses in the state of California, while they are in fact the chief sponsor supporting the recent Proposition 19 property tax measure, watering down  property tax relief for California home owners… contributing to the higher cost of living in the state… Obstructing the way heirs can avoid property tax reassessment by unraveling the “Parent to Child Exclusion” or Parent-to-Child Exemption, as realtors like to call it.

As a matter of fact, this past August, the median home price in California was up more than 12% from a year earlier, according to CoreLogic/DQNews. Experts say the median home price is being impacted by an increase in luxury homes along with the flexibility of remote working options, which also allows people to move away from places like Los Angeles or San Francisco, to nearby states, in rural areas where families can get more space and amenities for far less cost than in many populated areas in California.

California real estate is often significantly more expensive than other, nearby, states. But then again, so is property in states like New York, or Chicago, in Oregon,  Maryland or Massachusetts. However. At least in California, homeowners and beneficiaries inheriting property have been fortunate enough to have property tax breaks at their disposal since 1978 such as Proposition 13, maintaining a low property tax cap of 1% to 2 % max.

Proposition 19, Trust Loans & Parent to Child Exclusion

Since 1986, Proposition 58 (now Proposition 19) has positively impacted property transfers and naturally property tax transfer, avoiding property tax reassessment on inherited property while inheriting property taxes from parents.  This  has actually saved homeowners in California tens of thousands of dollars over the years.  Hundreds of thousands, literally, over decades.

In fact, thanks to Proposition 19, trust loan based estate funding transactions save beneficiaries $6,000 to $8,000 or more on average, per family, every year.  No, it’s not millions… But for a regular middle class family it is definitely significant.   And if homeowners can’t access this type of benefit, it will hurt them financially year after year.

So even if we can buy a house more cheaply in a relatively inexpensive state like Ohio, or Idaho, South Dakota, North Carolina, or Wisconsin, for example… All comparatively less pricey than average property in many areas in California — we end up spending more anyway every year in property taxes in those other states. So we end up spending more every year anyway.

Property tax transfer, known as a parent to child transfer or parent to child exclusion, will always be low, at 2% or less – if we continue to be able to avoid property tax reassessment.  With new property tax laws in place, if we miss that 12-month deadline to move into inherited property – then we’re right back in the financial vice known as “current market value”…

And, thanks to California politicos who negotiated for us against the Legislature to at least retain enough of Proposition 58 so as long as we do get in under the wire, within that first 12-months after our decedent passes away… with 6-figure trust loan approval, we can, as beneficiaries, buy out co-beneficiaries’ shares of inherited property, which realtors call “sibling to sibling property transfer”, or ”transfer of property between siblings” and end up owning our own property anyway, without the problem of sharing real estate with siblings we’d rather not own property with.

Thankfully, although the timeline has now become more challenging, we can, as California inheritors and homeowners, still take advantage of tax breaks made possible by Proposition 19 and Proposition 13, in concert with an irrevocable trust — and buyout siblings,  so we can take over our own home at a nice low property tax base, more or less equivalent to the tax base enjoyed by our parents. Property tax relief in California may be a bit rocky right now… but it’s still there, if we use it carefully and judiciously.  And keep both eyes on that calendar!

PART TWO: Parent to Child Exclusion From Reassessment

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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.