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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Beneficiary Property Disputes Resolved by Loans to Irrevocable Trusts

Loans to Irrevocable Trusts

Loans to Irrevocable Trusts

Over the past several years, since 2016, we have seen a fair amount of estates, or inheritances in trust, that are embroiled in a dispute or infra-family trust battle over who should be receiving the larger share of cash assets or the largest percentage of an old home left a Mom or a Dad. And we see this pattern repeated over and over again; the same words, the same playbook, similar arguments and similar claims.

Several US firms that provide inheritance loans and cash advance assignments for estate heirs and trust beneficiaries receiving inheritance assets and property have all confirmed, when asked, that up to 75% of the families they have provided advance funds to were mired in infra-family squabbles and disputes over inheritance funds or inherited real estate. 

In California a simple trust loan solution involving Proposition 58, as well as specific tax breaks within Proposition 13, resolve certain beneficiary property disputes.  Only in California is it possible for family members to buyout a co-beneficiary, usually a sibling or several siblings, with the help of established property tax breaks…

Therefore, family disputes caused by sibling disagreements over whether or not they should sell or retain shared inherited property; or what that inherited property value should be, if the assigned tax assessor value is mistrusted, can easily be minimized… Generally, these conflicts are resolved rapidly and satisfactorily if a large loan to an irrevocable trust (working in tandem with CA Proposition 58) is implemented effectively through an experienced trust lender.

If this trust loan process is not implemented properly, the wheels trend to come off the estate wagon, so to speak, and these particular estates typically do not end well.  Whereas, if this trust loan & Prop 58 process is executed correctly beneficiaries end up owning their  inherited property securely, while siblings who insist on selling their inherited property shares end up receiving more money through the trust loan process than if they had received a direct non-trust cash payment from an outside buyer.

Residential and commercial property owners in every single state in America need to research benefits provided by trust lenders furnishing loans to trusts, specifically loans to irrevocable trusts and CA Proposition 13 transfer of property establishing a fixed low base rate in conjunction with a Proposition 58 transfer of parents’ property and transfer of parents property taxes. 

All property owners, for their own good, will eventually have to understand what inheriting parents property, inheriting property taxes, property tax transfer and what the ability to  transfer parents property taxes is really all about.  Plus how to keep parents property taxes at the lowest base rate possible.  Moreover, they must understand why a parent to child transfer, or parent to child exclusion, is so profoundly important and creates the core of property tax relief in California… And we can only hope in other states as well.  If homeowners in other states begin calling and sending emails to their often invisible representatives in Washington DC, this might actually become a reality in the near future – and should, given the economic challenges middle class families are facing, and will continue to face for some time to come.

Goods and services as well as real estate can be incredibly 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, decreasing property taxes down to a more manageable level can change people’s entire outlook on their life, helping middle class families to function more effectively with financial struggles, at least to some degree.

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 for ownership, for the rest of the time that you own that item?  Other than insurance, do you continue to pay taxes on a boat you own? An airplane? A car? A motorcycle? None. Only real property.  Perhaps the whole concept of taxing real estate after the initial purchase could use some fresh, new examination.

At any rate, California is still the only state in America where you can avoid property tax reassessment at current market rates; capped at 2% taxation,  as long as you own property inherited from parents… thanks to 1978 CA Proposition 13 enabling the ability to  transfer parents property taxes.  These issues are covered in detail on the California State Board of Equalization, that covers Proposition 58 at great length.  Or you can look at business oriented sites that focus on property tax relief,  such as Michael Wyatt Consulting, or trust loans and Proposition 58 at sites like Commercial Loan Corp;  or go take a look at resource info blogs such as Loan to a Trust, or even a blog like this one,  Property Tax News for information on Proposition 19, Proposition 13, and support or opposition to property tax relief in California, in the present as well as in years past for an accurate historical perspective.

PART ONE: California Beneficiaries Learn How to Make Prop 19 Work For Them

California Beneficiaries Learn How to Make Prop 19 Work For You - Part 1

California Beneficiaries Learn How to Make Prop 19 Work For You – Part 1

Representatives of the 2021 California Legislature don’t talk very much about Californians who are on the losing side of Proposition 19. They admit to “sweeping changes” in a generic sense, but rarely how those sweeping changes affect middle class people, not multi-millionaires, in specific actionable ways, such as unique property tax benefits thanks to Proposition 13… avoiding property tax reassessment, much to the benefit of regular working families’ bank accounts

We’re not talking about millionaires or billionaires here, we’re talking about middle class, working families who want their children or grandchildren to be able to inherit their home and be able to take advantage of a low Prop 13 tax base. It is as simple as that.

To take advantage of Proposition 19 or Proposition 58 to avoid property tax reassessment, heirs or  beneficiaries must move into an inherited home as a primary residence, within 12 months after the surviving parent passes away. Thereby avoiding property tax reassessment, as long as the offspring don’t decide to use this inherited property as an investment property… for vacation or rental purposes.   It sounds complicated, but it’s not.

For example, take a house in Santa Barbara bought by your parents in 1975 for $100,000.  By now, it’s valued at $2,000,000, yet the assessed value under Proposition 13 is $200,000. Therefore, your parents pay approximately $2,500 a year in property taxes, after local property tax assessments. Proposition 13, thankfully still hanging in there, allows for an unlimited parent-to-child exclusion, or “principal residence exclusion” as attorneys would call it; permitting offspring to inherit this home plus the $200,000 assessed value and the low $2,500 yearly tax hit. The 2% annual cap protects your property taxes so they can go up only $50 roughly per year.

Prop 19 caps the “principal residence” parent-to-child exclusion is now, since Feb 16, 2021, capped by Proposition 19 at $1,000,000 meaning, if we’re using our example of a $2,000,000 house in Santa Barbara (an admittedly modest home for Santa Barbara)… the additional $1 million in value will result in property taxes of $10,000 plus per year. 

Paying taxes only on 50% of your home’s value does sound like a great way to save on property taxes. However, it this can also be a negative for numerous working families… as there are also other costs, for instance maintenance, utilities, water, air conditioning and/or heat, unexpected repairs, certainly there is insurance and frequently a mortgage.

Factoring all this together, if you inherit a home and decide not to move in as a primary residence – your property taxes will go up abruptly and significantly! Regrettably, your lovely new inherited home will be reassessed at the full market value of $2 million, resulting in an annual tax bill of over $25,000! Not an attractive outcome for a middle class homeowner.

The Los Angeles Times characterized Proposition 19 as a tax law that: “…would just expand the inequities in California’s property tax system.” They claim it is a “…cynical and unwelcomed melding of good and bad tax proposals”.

The San Francisco Chronicle wrote: “It’s still a flawed package, designed to rev up home sales that benefit real estate agents who could reap more in commissions.”

And Mercury News wrote: “Prop. 19 merely plugs one hole in the state’s porous property tax laws while creating another. It’s time for holistic reform that simplifies the system and makes it more equitable…”

And yet, ironically, many of the same California newspaper editors that now vehemently appose Proposition 19 had formerly been printing articles and editorials that repeatedly indicated that limiting the ability to keep parents property taxes in California or “…limiting or ending the Proposition 58 parent-to-child exclusion was a good thing for California”. 

Oddly enough, these Editorials and Op-Eds were trying to convince CA homeowners that the Proposition 13 enabled process of transferring property taxes, and obtaining a parent to child property tax transfer was not — as the entire state of California has thought since 1978 — actually beneficial to homeowners and beneficiaries inheriting property from parents.

– the ability to transfer parents property taxes and keep parents property taxes in California when inheriting property taxes, were not positive property tax benefits for beneficiaries or homeowners.  Even though now, their official opinion is quite the opposite.

 

How Will Proposition 19 Impact Middle Class Families in California?

How Will Proposition 19 Impact Middle Class Families in California

How Will Proposition 19 Impact Families in California

Before Proposition 19 existed, parents in California could transfer their primary residence and $1,000,000 per parent of other property to their children without triggering a tax reassessment of  those properties. After Feb. 15, 2021 that exemption, the parent-child exclusion,  was watered down, limiting access to this time-honored exclusion from current property tax rates to moving into an inherited home only as a primary residence;  and limiting a beneficiary’s ability to go about avoiding property tax reassessment in CA to a strict 12-month move-in period. 

As long as this deadline is kept, heirs will be avoiding property tax reassessment in CA without issue.  An heir’s ability to transfer parents property taxes when inheriting property taxes, and the right to keep parents property taxes on any property tax transfer from a parent, as Proposition 19 parent to child transfer, or Prop 19 parent to child exclusion, is guaranteed.  As is the right for a beneficiary to get a trust loan from a trust lender to implement a  transfer of property between siblings… In other words, you can lock in a low Prop 13 property tax base plus buyout co- beneficiaries if they want to sell their inherited property.  Amen!  And in the midst of the Coronavirus crisis, with rampant unemployment and under-employment… a 6-figure trust loan could be a life-saver.

After Feb. 16, a transfer of a principal residence by a parent to a child (heir) is only exempt if the parent was using the property as their principal, or primary, residence; and the heir is also residing in the inherited home as a primary, principal residence following the parental property transfer.  If that is not a problem, we’ll most likely see an equivalent number of middle class and blue collar families avoiding property tax reassessment in CA as before Prop 19 became law. 

Even if only half as many people as before take advantage of the Prop 19 parent-child exclusion, 50% is still a pretty healthy number.  No other transfers of property between parents and children will be exempt from reassessment, with the exception of a family farm, which is currently defined but as “farmed land” whether the property includes a residence or not. 

Transfers that are excluded from property tax reassessment do have limitations, however.  The exclusion applies only as far as the assessed value at the time of transfer plus $1,000,000. Any property beyond that value would be reassessed at a current market tax value.

Housingwire.com recently wrote: “Prop 19 will deliver needed funding for cities, counties, and school districts when they need it most. It will generate hundreds of millions in annual revenue for fire protection, affordable housing, homeless programs, safe drinking water, and other local services and dedicated revenue for fire districts in rural and urban communities to fix inequities that threaten life-saving response times to wildfires and medical emergencies.”

So how will Proposition 19 impact the middle class, working family  housing market in California, admittedly an expensive state to live in.  Although certain components in California will benefit from a new property tax revenue stream, regular middle class and blue collar families residing in inherited homes may still find it difficult keeping up with the rising costs and expensive lifestyle of California. Yet Prop 58 can still help. Proposition 58 Property Tax Breaks are still in place, despite restrictions.  Providing you intend to occupy an inherited home as your primary residence you can still save as much as $10,000 annually in property tax savings.  

President of One80Reality, Nick Solis, tells us:  ““We are definitely  going to see property taxes rise on inherited homes. California is one of those places where blue collar workers usually pass down homes to kids and other family members. Those homes are now going to be taxed at a much higher rate. It will force their hands to sell, because the properties will be more expensive to retain.”

Mr. Solis said he’s not worried about selling homes, but a new demographic of home buyers is going to emerge. He tells us: “Not     all who receive inherited homes come from money. Many blue collar workers and families bought in previous decades when homes were affordable, and are passing them down to their kids. They will see a tax increase. We’re going to see a different demographic. We were already seeing a major push of middle class and blue collar people,  that could afford a home in places like the Bay area, now moving into the central valley or other more affordable places because they just feel too uncomfortable living in their current homes. And now taxes are going to be even higher on inherited homes.”

A well known California realtor, who preferred to remain anonymous,  recently claimed: “With higher property taxes, keeping inherited homes as rental properties may become unprofitable, estate-planning attorneys are going to be very busy, as this new law may cause many people to decide to sell properties that they intended to pass on to their heirs.” 

Millennials and other younger generations will be impacted as well, avoiding property tax reassessment in CA People in their early twenties might decide to leave California, with no plan to ever return.  This is quite different than recent years, where the state was attracting a lot of young starter-home buyers. The same young adults are now looking carefully for more affordable homes, after graduating from college – even if that means leaving the state completely, with a new job; and perhaps a new family.

Another seasoned California realtor told us, on condition of remaining anonymous:  “It’s a real game-changer.  Both in terms of California properties being sold that would have been passed on through a family trust, or by the beneficiaries who decide they either can’t afford to pay property taxes based on a current assessed value, or just don’t want to pay the higher property taxes. The state’s going to make a lot of money.”

Higher property taxes or not, California will always be an attractive place to live. There is sunshine 12 months per year, an ocean nearby, convenient cities and yet rural areas 30 minutes away… “People are always going to want to live in California, but I can see life getting more expensive here a lot faster than I expected,” Mr. Solis added.

Working With An Irrevocable Trust Lender

Irrevocable Trust Lenders

Irrevocable Trust Lenders

First, let’s go back over the key elements involved in the most popular trust loan beneficiary-conflict solution available in California.  It’s worth mentioning that 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… thanks to 1978 CA Proposition 13. 

And this is where we get into trust liquidity – something a lot of folks in California don’t really understand. California business property 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 Proposition 13 two-percent tax rate maximum – can maintain a low property tax transfer rate basically forever, through a parent to child transfer, or “parent to child exclusion”, as long as all tax relief requirements have been met, usually with the assistance of an experienced irrevocable trust lender.  

Additionally, Californians even have the right to apply for the same tax break on a secondary property inherited from parents.  Approval is a formality only. No only that, as a California property owner you can buyout as many siblings as you like; that is to say, as many co-beneficiaries as there are who wish to sell their inherited property shares – as long as you are approved for the appropriate amount of funding to a trust loan, from your trust lender… And as long as the co-beneficiaries are fully committed to selling out through a trust loan, rather than accepting less money from a third-party outside buyer – while you keep the same inherited property from your parents, financed through the trust loan, avoiding property tax reassessment for that point on, establishing and maintaining a low Proposition 13 property tax base.

Elements that drive this process are worth researching, to understand the subject better and simply to be able to work more effectively with a trust lender… Many of these process elements are covered in detail on the California State Board of Equalization website, focusing on various relevant components within Proposition 58 among others.  Or you can research heavily detailed business sites such as Commercial Loan Corp, the brainchild of forward-thinking CEO Kerry Smith;  or info-blogs such as Medium.com,  or perhaps  the Trust and Estate Loans micro-site; or the Property Tax News blog…  Trust loans working in accord with Proposition 19 make it possible for heirs and beneficiaries to sell their shares of inherited property, a co-beneficiary buyout of sibling property shares – as realtors put it, “the transfer of property between siblings”, and “lending money to an irrevocable trust“ – typically from an irrevocable trust loan lender.

Commercial Loan Corporation in Newport Beach, CA appears to be the “favorite flavor” of the decade, where trust lenders are concerned, as they specialize in taking full advantage of all Proposition 19 property tax relief benefits for clients; helping beneficiary siblings avoid property tax reassessment, while making sure they transfer parents property taxes correctly, when inheriting property taxes from parents, a business facility, home and/or land; abruptly inheriting property taxes that have to remain low, simply to free up some needed cash; in order to keep up a reasonable lifestyle, what with the cost of living in California these days.  

You also want to be careful, to work with a trust lender that has a great deal of experience with this process… To make sure that beneficiaries and  property owners take full advantage of the right to keep parents property taxes, with a low Proposition 13 tax base.  No other state in America even comes close to providing this sort of property tax relief. And property taxes in this country, for the most part, are high for a middle class and working class families. No other state gives residents the ability to use a CA Proposition 58 or California Prop 13 type of property tax transfer, with parent to child transfer, or as lawyers like to call it, “parent to child exclusion”.

The fact is, we need to know how to work with a professional trust lender to be able to use tax breaks as efficiently as possible, that as Californians we are fortunate enough to have access to.  Moreover, every property owner in every state should know how to work with an irrevocable trust lender to buy out a beneficiary’s share of inherited property; and basically understand how a sibling-to-sibling property transfer or co-beneficiary buyout of sibling property works in California.

Bottom line, every state in this country should have trust lenders to work with  to take advantage of residential and commercial property tax relief solutions similar to Californian property tax breaks such as CA Proposition 13, and now Proposition 19 – enabling property owners to keep parents property taxes, at a low 2% capped tax base from Prop 13… along with property tax transfer benefits still in effect from CA Proposition 58; enabling the transfer of property between siblings, or, more specifically, allowing a co-beneficiary buyout of sibling property, paying them cash to not sell out, while you get to keep your parent’s house and/or land at that super low Proposition 13 protected tax base.

If you are in need of a loan to an irrevocable trust, please completed this form and we will have a representative from Commercial Loan Corporation contact you; or you may call them at 877-464-1066:

What Will CA Prop 19 Accomplish for Families Looking For a Low Property Tax Base?

California Prop 19 Info

California Prop 19 Info

The pro-Proposition 19 members of the realtor community in all 58 counties throughout California are openly enthusiastic about Proposition 19, more or less  due to an anticipated increase in property sales, accelerated broker commissions and increased property tax revenue.

Other political, partisan professionals believe in the new tax measure as well, such as Jim Brulte, California Republican Party former chair, who stated, “Proposition 19 protects tax savings and other benefits for vulnerable Californians including seniors, disabled homeowners, and wildfire victims.  State and local Democrats should close unfair loopholes, and provide needed housing!”  Alexandra Rooker, former chair of the California Democratic Party said, “Proposition 19 protects seniors and working families…”

Yet, some others do not see it that way. Why?

Jon Coupal, President of the Howard Jarvis Taxpayers Association wrote in a recent editorial: “Proposition 19 is an attempt by Sacramento politicians to raise property taxes by removing two voter-approved taxpayer protections from the State Constitution. This Prop 19 measure would, all too frequently, require reassessment to market value of property transferred from parents to children, and grandparents to grandchildren.”

Sara Kimberlin and Kayla Kitson at CalBudgetCenter.org, the non partisan California Budget & Policy Center that focuses on public policy news and analysis and the effect of these policies on middle class and working California families – are among the unconvinced.  Ms. Kimberlin and Ms. Kitson tell us emphatically, in direct contrast to the statements from Mr. Brulte and Ms. Rooker: “Proposition 19 does little to help California’s housing affordability crisis! It has created a complicated property tax scheme, and reinforces racial inequities in California.”

As one of the most complicated, confusing measures on the November 2020 state ballot, Proposition 19 did genuinely seem to promise large improvements for seniors, homeowners with “severe disabilities” (which is almost impossible to define), the firefighter’s union, and other related parties. A sure sentimental winner when it comes to pulling the heart-strings of Californians.

Yet the closer you looked (which few bothered to do prior to the vote in November 2020) the more significant the changes to California’s residential property tax system you saw… Some helpful to regular middle class homeowners, folks with disabilities, and seniors… Some not so helpful. In the past, you would want to keep parents property taxes through parent to child transfer. As well as locking in a low property tax base while buying out siblings’ inherited property through Proposition 58 and a trust loan. Now it’s through Proposition 19… and there are limitations. and there are l

If you are inheriting CA property taxes from a parent, hoping to keep your parent’s home, that they left to you, as well as keeping their low Proposition 13 tax base – and your attorney is recommending a 3rd party loan to make all this happen, while buying out co-beneficiaries that are looking to sell off their inherited property shares – it would make a lot of sense to call an established trust lender to get advice and possibly a large irrevocable trust loan.  You want to look into California lenders who will lend directly to an irrevocable trust or probate estate. You also want to make sure you understand all about inheriting CA property taxes from a parent, as well as how to transfer parents property taxes when Inheriting property taxes from a parent.  You want to make sure, regardless, what it takes to keep parents property taxes on any property tax transfer, with a parent to child transfer… and parent to child exclusion from having to pay egregious, current property tax rates! 

In actual fact, it looks like Proposition 19 will most likely expand a property tax loophole for older wealthier homeowners, while covering the cost by narrowing the parent to child exclusion, or exemption, for beneficiaries of inherited properties – but, and here’s  the problem, also requiring state and local governments to create new systems capable of tracking how much new property tax revenue is coming in as a result, with a far more sophisticated, robust administrative infrastructure; significantly increasing overhead costs of existing administrative local governments.

They expect Prop 19 will bring in additional hundreds of millions (economists insist it’s nowhere near the billion-plus the California Legislature is anticipating).  And yet this new admin system will call for a great deal more in administrative costs to manage, hire, create software and train staff for this new tax system than anyone is realistically projecting at this point… as well as re-allocating the supposed additional hundreds of millions due to Proposition 19, as a final step. 

VoterGuide.sos.ca.gov tells us Proposition 19 is likely to result in increased state and local revenues – but not for every county. They tell us while most of the new Proposition 19 property tax revenue willhat-does-ca-proposition-19-accomplish be restricted to a new fund limited to supporting fire response, Prop 19 also limits taxes on seniors, “severely disabled” homeowners, and wild fire of forest fire victims.  Tax analysts and assessors refer to these people as “eligible homeowners.”

An eligible homeowner can move within the same county and keep paying the same amount of property taxes if their new home is not more expensive than their existing home. Also, certain counties allow these rules to apply when an eligible homeowner moves to their county from another county.  So, despite the positive benefits, implementing Prop 198 will not be as simple and as easy as it’s supporters  claim it will be.

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

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.

Is a Parent to Child Transfer Still Relevant for CA Beneficiaries & Homeowners?

Parent to Child Property Tax Transfer

Parent to Child Property Tax Transfer

In a Pandemic depressed economy, with a tsunami of unemployed and under-employed workers floating around in every state… it’s obvious that middle class working  families need to save more… and spend less – on items not classified as necessary for survival.  Property taxes being one of those sort of artificial expenses imposed on citizens by the government.

One solution for this dilemma is property tax relief, which we talk about at length on this blog.  Why not institute genuine property tax relief, not tax deferment as the state government has suggested, moving payment dates around.  Clearly ineffective in a crisis like the one we’re in right now.  California needs expanded property tax relief that’s even more wide reaching than  what we have now.  

We should be building on what we already have – not watering it down!  Despite property tax breaks that no other state has, California could use expanded tax breaks from Proposition 19, to help homeowners establish an even lower property  tax base, saving residents even more during  a crisis like the pandemic we’re in right now.  With an even greater ability to resolve inherited property conflicts between beneficiaries as well. 

In other words, a beneficiary buyout of co-beneficiary property shares, while avoiding property tax reassessment, can be re-drawn so there is no 12-month deadline for beneficiaries to follow… Plus the ability to avoid property tax reassessment on certain investment properties that have revenue potential. 

Residents need more opportunities in a depressed economy like we’re in now to drive revenue, not less.  Solutions like inheriting property taxes in California 2021 need to be expanded statewide, and legally strengthened. Solutions and firms like that will help beneficiaries & homeowners buyout a sibling’s share of an inherited home as an investment property to rent out, not just to live in as a primary residence.

Every property owner should understand the details underlying Prop 19, and know what’s involved with a beneficiary buyout of sibling property shares, or “transfer of property between siblings”, and “lending money to an irrevocable trust“ – from an irrevocable trust lender.  Every California homeowner and beneficiary inheriting property should know how a sibling to sibling property transfer works; keeping yearly taxes on property at parents low rates; and inheriting property taxes in California 2021.

Only California allows this, so it’s worth taking a closer look, and taking full advantage of.  Take a look at the site managed by CA State Board of Equalization, at and research property tax breaks  and Proposition 19 property tax relief revisions at Loan to a Trust  and read up on updates to Proposition 19 at this blog, Property Tax News.    There are also property tax consultants to learn from  such as  property tax specialist Michael Wyatt Consulting who are experts at property tax breaks that save homeowners, commercial property owners, and beneficiaries inheriting property thousands of dollars if not tens of thousands of dollars every year.   

The well known president of Commercial Loan Corp, Kerry Smith is another expert to learn from, or to receive a trust loan from, if the need is there.  Trust and Estate Loans is another source of excellent material, if you want to learn more about establishing a low base property tax rate through a trust loan, and Californians ability to execute a transfer of parents’ property and transfer of parents property taxes when inheriting parents property and inheriting property taxes during a property tax transfer with your parents’ low property tax base. If you’re going to own property in California, it’s worth it to know about your ability to avoid property tax reassessment, and to keep parents property taxes.  Well worth it!  

The California Proposition 19 Newspaper Debate

California Proposition 19

California Proposition 19


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

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

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

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

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

And in opposition…

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

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

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

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

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

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

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

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

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

The Affect of Prop 19 on the Housing Market & Working Families in California

California Proposition 19 Property Tax Assistance

California Proposition 19 Property Tax Assistance

Jeanne Radsick, president of The Realtors Group, said recently:  “it’s vital  for homeowners who may be empty-nesters or who are looking to move for health reasons to have more options.  And if they can maintain  stable tax basis, they can live a similar life.  There’s not enough senior housing to accommodate older folks otherwise.”

Still, beneficiaries of Proposition 19 are those who already benefited the most under the state’s existing property tax laws.  Homeowners 55 and older in California are more likely to be older and not poor.  Although, an analysis of Proposition 19 by the California Budget and Policy Center, has some interesting things to say. They are a non-profit that is an advocate for working families and lower-income Californians…. 

At any rate,  their analysis tells us that homeowners in California tend to be more white and wealthier and older.  They seem to be forgetting that homeowners  also happen to be middle class and blue collar; but the study ignores the fact that middle class and working families are the principle users of Proposition 13, Proposition 58 and now of course Prop 19 exclusion for reassessment of property taxes.  Although, the real estate industry does i fact stand to benefit from the increase in home sales that is expected as a result of the Prop 19 measure.  But there’s nothing we can do about it, so we may as well focus on what we can do to lower property taxes.

However. Property tax relief is not chiefly for wealthy Californians nor was it meant for them.  In fact if you crunch the numbers without bias, the high volume of beneficiaries using trust loans to buyout siblings, establishing a low property tax base; while using the parent to child exclusion to avoid property tax reassessment… are mostly middle class.  Not millionaires. We don’t quite follow why they keep making that argument.  Millionaires surely aren’t the only folks interested in Proposition 13 and Prop 58, property tax transfer, or rather the ability to  transfer parents property taxes, to keep parents property taxes while inheriting property taxes during a parent to child transfer, or parent to child exclusion. 

We certainly see more working families and upper middle class families buying out a siblings’ share of a mutually inherited home, than we do corporate CEOs. Another key Proposition 58 benefit… allowing for the exclusion for reassessment of property taxes on transfers between parents and children. Not just for rich people!

Ms. Radsick said that protecting Realtors’ interests was not a driving force behind the push for Proposition 19.  “It is not about making money for the Realtors, for crying out loud,” she said. “It’s about tax fairness for people who need help.”  We need to sit back and really ponder that statement.

Liam Dillon at the Los Angeles Times had some interesting views on the   evolving property tax breaks available to Californians.  He writes:  “The biggest winners under Proposition 19 would be homeowners 55 and older who would pay lower property taxes when moving to a new, more expensive residence.  Currently, homeowners who are 55 or older have a one-time opportunity to retain their existing tax benefits if they move to a home of equal or lesser value within the same county. They can do the same when moving between Los Angeles and nine other counties.

Mr. Dillon goes on to say:  “Proposition 19 would further ease the tax burden by allowing the same group of senior homeowners to blend the taxable value of their old house with the purchase price of a new, more expensive home, reducing the property tax payment they’d otherwise face.   Disabled homeowners would receive the benefit as well. The rules under Proposition 19 would extend to every county in the state, and homeowners could take advantage of the break as many as three times when they decide to move.”

The downside, from our viewpoint, is the fact that given higher property taxes, using  inherited homes as rental properties may soon become unprofitable, without raising rents significantly… and that is not likely to be an effective long-terms solution. The fact of the matter is, these new property tax laws may encourage a lot of residents to sell properties they own, that they intended to leave to their heirs. Hence, realtors and brokers make more money, and that was one intention right from the beginning for Prop 19.

The concern surfacing among analysts revolves around the possibility of important companies leaving California for more business-friendly, lower-taxed states, taking their jobs with them.  As well as young white collar folks in their 20s and 30s, seeking more affordable property to settle into in nearby states; with a new job; focused on raising a family where they won’t get blasted every year with super high property taxes and income taxes, along with a high cost of living.

But, on the other hand… Higher property taxes or not, California will always be an attractive place to live.  There is still exclusion for reassessment of property taxes; there is still sunshine 12 months per year, an ocean nearby, convenient cities and beautiful rural areas 30 minutes away. And you can always find a good deal on most things, if you look for it.  People are always going to want to live in California.