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.

PART ONE: Surviving CA Proposition 19

California Proposition 19 2020 Election

California Proposition 19 2020 Election


Californians are anxiously waiting to see if voters pass or sink CA Proposition 15, affecting business and commercial property owners by specifically removing their ability to legally avoid property tax reassessment; as well as  Proposition 19, which is designed to unravel the “parent to child exemption” or “parent to child exclusion” (from current, reassessed property tax rates).

In fact Californians are wondering right now, if Proposition 19 passes, how much Proposition 58 will be affected; and how they will be able to get a trust loan to buyout siblings who wish to sell mutually inherited property.  Or exactly how they will be able to work with Proposition 58 to lock in a low property tax base rate, if Prop 19 passes. Companies like Commercial Loan Corp, are fielding questions like this as we speak. 

If Prop 19 passes, California can say goodbye to any property tax transfer activity from one family member to another… there will be no way to transfer parents property taxes at a nice low base rate, in fact inheriting property taxes from parents to avoid property tax reassessment or the right to keep parents property taxes with a parent to child exemption will, sadly, be a thing of the past. 

If voted into law, as the LAO (Legislative Analyst’s Office) tells us, these  property tax measures will, in effect, repeal popular inter-generational transfer protections guaranteed by Proposition 58’s parent-to-child exclusion and Proposition 193 (grandparent to grandchild exemption) property transfer tax breaks – upending tax relief protections that Californians have depended on for decades.

Proposition 15 removes property tax breaks for landlords and other business  property owners – which, if voted into law, would not only directly affect business and commercial property owners, impacting stores, gas stations, supermarkets, etc., frequented every day by consumers – but will impact everyone in California.  Not only for countless people renting units in apartment buildings all across the state, but also for tenants renting commercial properties and offices in commercial buildings will be paying much higher property tax, and therefore will be forced to raise their prices.  Hence,  the cost of goods and services will go up in all 58 counties in the state. If Prop 15 passes, prepare to pay significantly higher prices, basically for everything – for rent, gas, food, air & ground travel, clothes, electronics, movies and computer entertainment, cel. phones…  you name it!

This leaves us at roughly 50,000 to 60,000 families in California that will be victimized economically by unreasonably high property taxes… in the midst of a Covid-19 pandemic no less.  Obviously, many middle class families will  be unable to keep inherited property due to property tax hikes… and, among other difficulties, will be generally unable to afford decent health coverage that includes preexisting conditions… unless they’re over 65 and have access to Medicare – unless the ACA (“Obamacare”) has been watered down, as Republicans have repeatedly promised to do… and this is on the record.  So people in California are nervous; as are folks nation-wide.   

On top of this crisis for California home owners – if Proposition 15 passes, tenants that don’t  own but pay rent will suffer from increased rents – as Prop 15 will unravel commercial and business property owners’ ability to avoid property tax reassessment at current rates. Business property owners and landlords will no longer be able to retain a low property tax base-rate, such as  home owners supposedly will continue to do – although most of us are not entirely convinced about that. Once the door has been opened, so to speak, do we really believe that the powers that be in California, the Legislature, and their realtor colleagues, are simply going to stop there? 

As far as Proposition 19 is concerned, most middle class beneficiaries and  families inheriting real property from their parents would be forced to sell that  property within the first year, as Prop 19 dictates, plus most beneficiaries or heirs will be unable to cover increased transfer costs and, in particular, yearly hiked up property taxes.  Hence, they are doubly motivated to sell inherited property many would much prefer to keep. 

Opponents of CA Proposition 13 repeatedly offer up the tired tale about the Bridges family using Prop 13 to transfer a pricey luxury beachfront property, paying little tax, and renting out for big bucks.  It’s interesting that this story  is literally the only narrative we hear about that condemns Proposition 13 and Proposition 58 by real-life example. So they raised $58 Million, in part, on this much repeated tale, and other anecdotal non fact-based evidence, to destroy property tax relief in California.

>> Click Here for Part Two…

PART ONE: If Every State in America Had Property Tax Relief Similar to California…

California Proposition 58 Property Tax Transfer

California Proposition 58 Property Tax Transfer

Considering every state in America, if we were to project into the future and take into account all the ways we could avoid wasting money as a  result of inheriting  property from our parents… If you were expecting property as an inheritance – what would you do to make sure you were inheriting a home you could afford to keep? 

Nothing comes to mind?

What if every state in the union embraced the same sort of property tax breaks that California has employed since 1978… when Proposition 13 was voted into law so every residential, industrial and commercial   property owner would be able to avoid property tax reassessment. 

Subsequently, CA Proposition 58 was passed in 1986, enabling the transfer of property between siblings, making it possible to buyout your siblings’ property shares, plus insuring that you keep parents property taxes, basically forever – maintaining a low Proposition 13 guaranteed property tax base, capped at  a 2% maximum rate – all with the help of a loan to an irrevocable trust. 

Sounds simple, however it’s not quite as simple as it sounds. You need a reliable trust lender to help you, and you must qualify for all  the requirements necessary to be approved for Proposition 58 – in order to take advantage of it. 

Given the stunning unraveling of the job-based economy over the past several  months in the United States, due to all the lay-offs and so-called “furloughs” resulting from the Coronavirus crisis – as of August 2020 there are over 51 million lost jobs nation-wide, and more than 6.7 million unemployed in California alone… although what percentage of that is  temporary or permanent – we don’t yet know.

Frankly, the danger that the loss of millions of jobs poses to the country, not to mention the startling lack of engagement exhibited by the federal government, only exacerbates the health crisis.  Therefore, it’s clear to most of us that it’s high time lawmakers in Washington begin to put in place some permanent financial guardrails to help working class and middle class households lower expenses to some degree, to hopefully free up some spending cash for those that are out of work, with no resolution yet in sight. 

One such guardrail would be to free up additional personal spending cash by lowering property taxes on the middle class, whose spending habits, historically, keep the economy flowing.  It would make a great deal of sense right now, with no end to the Coronavirus challenges in sight, to not defer certain taxes – but to completely eliminate them! 

Most likely,  the least risky form of taxation to lower right now would be property taxes, as we have a successful property tax relief model in California to mirror in all the other states – preventing politicians from claiming that it probably wouldn’t work out, so why bother… why try.   Clearly, property  tax relief has worked out, and continues to be a successful system, in California. 

It would certainly help to prop up a flagging middle class besieged by an unprecedented Pandemic, and corresponding recession, to put in place residential and commercial property tax breaks similar to Californian property tax relief measures made possible by CA Proposition 13, enabling property owners, in the wake of  transfer of property measures, to avoid property tax reassessment every year… Making sure to transfer parents property taxes when  inheriting property and inheriting property taxes from parents… in other words inheriting property taxes that equal the lowest taxes your parents paid after 1978. 

Prior to 1978, property taxes were unpredictable and way too high in California… until trust  beneficiaries and heirs of estates were given “parent to child transfer”, or “parent to child exclusion” as real estate attorneys refer to it.  

Interestingly enough, since 1986 California trust loans have been used to resolve seemingly unsolvable inherited property conflicts between siblings; working alongside CA Proposition 58. Once approved, Prop 58 helps heirs to buyout sibling property through trust liquidity – siblings that are intent on selling their property shares… Generally called a beneficiary buyout of sibling property shares, sibling to sibling property transfer, or a transfer of property between siblings – siblings looking to sell their property shares wind up with more liquidity in trust than if they had sold out directly to an outside buyer.  Conversely, folks looking to keep their inherited property can avoid property tax reassessment at present day rates, going forward; retaining the same low property tax base their parents had. 

That’s the real genius of the property tax relief system in California… and the bottom line gift for middle class home owners and non-wealthy landlords in California – the legal right to avoid property tax reassessment. 

The magic of trust loans from trust lenders is that they make it possible, when working in concert with Proposition 58, to equalize cash to beneficiaries – in other words Prop 58 helps heirs to buyout sibling property – if they’re looking to sell an inherited property held up by beneficiaries of the same trust that are looking to keep the same inherited home and/or land…

For once, this would force estate property conflicts to end up as win-win scenarios for heirs of estates or trust beneficiaries in states other than California.  And we’re talking about beneficiaries who generally do not get along terribly well, as is illustrated by the frequently hard-nosed conflicts associated with their inherited property issues… where one or two want to keep their inherited home…  while several wish to sell… One wants to evaluate the property at one amount, the others at a different amount. Many families, typically the siblings, just can’t agree on anything.

And yet other families agree on everything in these estate or inherited property matters…. So you just never know.  However, typically there are some problematic conflicts to address.  And that’s where a trust lender tends to come into the picture – as we have said, to “equalize cash” for  those who wish to sell, while setting  a low base tax rate for siblings who are set on keeping the home inherited from beloved parents.

>> Click Here to go to Part Two…