Property Ownership that is Excluded from Reassessment

Inheriting Property Taxes in California

Inheriting Property Taxes in California

California residents voted Proposition 19 (Assembly Constitutional Amendment No. 11), into law on Nov 3, 2020 – and became active on Feb 16, 2021; changing the parent-to-child exclusion and adding other tax relief exemptions involved with inheriting property taxes in California.

Reassessment Exclusions and Property Tax Exemptions

Regardless of revisions of any kind, an exclusion from property  reassessment at current property tax rates still allows parents to transfer their primary residence or in certain cases a “family farm” – to their children, as heirs avoiding full reassessment; as long as they move into their home as a primary residence once the property transfer is complete, or if it’s a farm, as long as they continue to use that property legitimately as a functional farm.

If a home is being transferred, heirs have to claim a “homeowner’s exemption” to prove that that the home is being used as a primary or principal residence. As most people know by now, this exclusion is now under limitations as to the assessed value of the home, plus $1,000,000. Even if all the “i’s” are dotted and the “t’s” are crossed the home will be reassessed at current market value if it exceeds the existing assessed value plus $1,000,000. Moreover, the “Claim for Reassessment Exclusion” and “Claim for Homeowners’ Property Tax Exemption” must be completed and filed.

Pro Rata & Non Pro Rata Distribution

Even though the parent-to-child exclusion (i.e., parent-child exemption) applies to non pro rata trust distributions from a parent to their children (heirs) – this never applies to transfers between siblings… So many think it’s better to give the trustee managing the trust the power to distribute equal cash assets to the heirs as pro rata distribution, rather than allow a trustee to give the children different values… 

Of course, when a trust loan is applied to the process in conjunction with Proposition 19 (formerly Prop 58, passed in 1986), it is as pro rata distribution, so all beneficiaries selling off their inherited property shares will receive equal revenues from the sale, typically from one heir, or multiple beneficiaries, looking to keep their inherited parental property, while keeping their parent’s low property tax base, as stipulated and protected by CA Proposition 13. 

Avoiding Property Tax Reassessment & Property Tax Hikes

As long as a beneficiary moves into an inherited home as a primary residence within 12-months of the passing of the parent, the beneficiary can transfer parents property taxes and keep parents property taxes when inheriting parental property and subsequently inheriting property taxes in California. A  property tax transfer (inheriting property taxes in California) still goes hand in hand in California with a parent-child transfer, namely a parent-to-child exclusion, to avoid property tax reassessment or fair market property tax rates. 

Which is why it is so important to keep up with correct information on any current property tax hikes…  Plus, staying current with any new releases from the Legislature regarding property tax breaks, or new rules for property tax transfers.  Moreover,  it really is critical to keep up to date on all pertinent, accurate  and timely property tax news and resources for transferring property taxes in California

Working With a CA Trust Lender or Property Tax Consultant

A pro rata distribution of the assets of an estate means that each heir receives an equal portion of each asset in the estate. A non pro rata distribution means that each heir receives an equal proportion of the entire estate but not necessarily of each asset.

Should the children of the grantor parents decide to trade properties after the distribution of the trust – any real estate will certainly be reassessed.  That’s why it’s so important to have a trust lender or a property tax consultant at your side before you plunge into all of this, if you are a middle class homeowner and can’t afford an expensive real estate attorney. That’s perfectly understandable.  Join the crowd…

Property Tax Relief for All Americans, Not Just California

Property Tax Relief

Property Tax Relief

A recent survey from Ameriprise Financial:

  • Discovered that 65% of Americans have never written and   signed off on a Will;
  • 77% of Americans plan to leave a financial inheritance for their children or grandchildren;
  • 64% of Americans believe they are actually in a position to even leave an inheritance of any kind to their children;
  • only 50% of aging American parents have an estate plan in place reflecting inheritance assets being left to their children.

Some retirees are committed to leaving money and assets to their children; while other parents see it as “a good thing to do”… yet “not essential” as part of their plan for retirement. Not exactly a sign of high interest on the part of parents, is it, where leaving money to their children are concerned!

However, middle class and even upper middle class families in the United States are understandably concerned about cash flow, and the future of their net worth.  Exacerbated by increasing concern over the variant Covid virus issues; which further discourages  parents from leaving anything at all to their children upon passing away… virus or no virus.

These concerns are causing many families in America to believe that all states in America, not just California, should have tax relief laws benefiting middle class, lower middle class and upper middle class consumers, not just tax cuts and property tax breaks for wealthy residents.

Different state economists are looking specifically at property tax relief for their state, as this is one of the simpler areas to affect in this manner to help free up more consumer cash, and thereby improve their overall economy in this fashion, step by step.

Allowing beneficiaries of trusts and heirs of estates to be able to access genuine property tax relief… with the ability to get a loan to an irrevocable trust from a trust lender, when parents leave a home to them as an inheritance.  This enables these folks to keep their family home, inherited from parents, at a low property tax base.

This process also enables beneficiaries to buyout sibling beneficiaries – or as attorneys put it, “the transfer of property between siblings, without a direct sibling-to-sibling transaction” – by lending money to an irrevocable trust – typically from an irrevocable trust loan lender, who can guide your ability to buyout sibling beneficiaries, and show you how you’re putting a lot more cash in siblings’ pockets when you go through a trust loan to buyout sibling beneficiaries. The fact is, we need to know our rights, with respect to these unique tax breaks. 

Homeowners and beneficiaries in all states should know how to buy out beneficiaries’ shares of inherited property; and how sibling-to-sibling property transfer works. Moreover, all Americans should know how loans to irrevocable trusts can help co-beneficiaries get cash while avoiding selling their share of an inherited house – keeping yearly taxes on property at their parents low tax base.

All middle class Americans should be aware of  the California system, of California advantages of inheriting parents property and thus inheriting property taxes that are lower and can remain low. Property tax transfer is an unknown in so many states…whereas  inheriting a parents’ low property tax base, and avoiding property tax reassessment, as well as being able to buyout sibling beneficiaries with a trust loan – should be known to all, and be a normal state of affairs in all states.  It certainly is a “best kept secret” for wealthy families all across America!

Property owners in other states can surely find the time to start the ball rolling to start adopting these property tax relief laws, plus they should be able to see how these types of yearly savings free up cash for many homeowners to be able to purchase a larger home later on.

This would feed more sales activity and cash back into the local economy, with loans to trusts to avoid property tax reassessment, working in concert with new property tax measure that became active in Feb of 2021, California’s Proposition 19 – which used to be the ultra popular Proposition 58, enabling exclusion from current tax rates with a parent to child property tax transfer – along with Proposition 193 for grandparent-to-grandchild exclusion from high fair market rates.

Designing a system like this that has been so successful in California would keep property taxes at a much more equitable system state by state, whereas right now most states do not have a system in place similar to California are not offering middle and lower middle class families a sustainable system within which they can thrive and increase their spending ability.

Californians would then be able to give back more consistently into the general overall economy – inheriting property taxes they can afford, hence being able to maintain inherited property, while helping to increase overall intra-state consumer spending. Creating positive overall financial connectivity, instead of separate declining family spending capabilities, which do not benefit the whole at all.

Economists in many states now believe that within struggling families, if beneficiaries were able to transfer a low property tax base from parents, with an iron clad right to keep parents property taxes as a part of the inheritance process, from parents and grandparents – middle class, upper middle class, and working families would all benefit greatly, and at the end of the day their state would benefit as a whole as well.

If this system were in place in other states, families would be able to free up more cash to spend on goods and services all across their state, thereby benefiting merchants and other consumer businesses, benefiting their families, so they can spend more, moving more cash into the economy, and so on – benefiting each state economy all the way around in every state that shifted in this direction with property tax relief measures designed to help not only individual homeowners and beneficiaries but each state in general.

Saving money on inheritance based property transfers would (as it does in California) allow middle class and upper middle class beneficiaries who do not wish to sell out to keep their parents’ home in the family, which most middle class inheritors otherwise could not afford to do. And yet, unfortunately, California is still the only state that provides a systemic system to help residents avoid property tax reassessment at current, unaffordable rates.

This sort of property tax relief program… capped at 2% taxation, as offered by the 1978 CA Proposition 13 would allows residents in other states to keep parents property taxes, and inherit property taxes at a low property tax base… having the ability to use a Proposition 19 style property tax transfer, with a parent-child transfer or parent-to-child exclusion.

Propositions 58 & Proposition 19 Trust Loan

Proposition 19 Trust Loans How To Keep a Parents Low Property Tax Base On An Inherited Home In California

Proposition 19 Trust Loans
How To Keep a Parents Low Property Tax Base On An Inherited Home In California

Trust Loans: Keeping a Low Property Tax Base

California trust loans are commonly used to establish a low property tax base for beneficiaries inheriting a parent’s home, working in conjunction with California tax break Proposition 58 and California Proposition 19. 

This process, often involving a loan to an irrevocable trust, also sometimes resolves inherited property conflicts between siblings by providing needed cash for a trust distribution. In case you didn’t know, after Feb 2021 the popular Proposition 58 parent to child exclusion (from property tax reassessment at high, current market tax rates) is now essentially the Proposition 19 parent to child exclusion. It has basically morphed into the new  Proposition 19 property tax measure – yet still enabling most  beneficiaries to buyout their co-beneficiaries’ shares of inherited property and avoiding property tax reassessment for themselves, retaining a parents low property tax base going forward.

In other words, it’s still possible to buyout  a siblings portion of an inherited home and keep a parents low property tax base using California Proposition 19.  The process is sometimes refer to as “a transfer of property between siblings” or “sibling to sibling property transfer” – funded by an irrevocable trust loan – from a trust lender specializing in the trust loan and CA Proposition 58, Prop 19, and Prop 13, process. 

Moreover, it’s still possible, thankfully, to transfer parents property taxes when inheriting property.  The ability to continue inheriting property taxes, to keep parents property taxes basically forever on any property tax transfer through the parent to child transfer and parent-child exclusion, is still intact and protected by Proposition 13 and to a more limited degree by Proposition 58  and now Proposition 19.  Exactly for how long, we’re not sure — which is why voters must keep a close watch on critics of property tax relief in California, on the realtor community, and on the CA Legislature.

If you are interested in taking advantage of your California Proposition 19 property tax benefit and avoiding property tax reassessment on an inherited home, we suggest calling Commercial Loan Corporation at 877-756-4454 when a third party loan might be needed to provide the funds needed to equalize a trust distribution and buyout siblings. You may also complete the online California Proposition 19 Parent to Child information request form located here.

When a child is inheriting a home from a parent and would like to use Prop 58, or Prop 19 to keep a parents low property tax base it is still entirely possible to do so!  You may be inheriting a home from a parent, in trust, yet if there are not sufficient cash assets in the trust to make an equal distribution, then a loan against real estate in the trust will be needed to qualify for the parent to child transfer to avoid property tax reassessment – and this can still easily be done, with the right property consultant or trust lender, such as Commercial Loan Corp in Newport Beach, CA or Michael Wyatt Consulting in Corona, CA; despite some imposed limitations from California Proposition 19.

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.