CA Property Transfer Benefits Expanded by Proposition 19

Prop 19 Property Tax Breaks

Prop 19 Property Tax Breaks

As most of us know by now, yet it does merit repeating – a parent-child exclusion is not the only key tax break offered by Proposition 19.  California homeowners age 55 plus, or  who are victims of a validated natural disaster such as an earthquake or heavy flooding, or who are extremely disabled – who are looking to transfer their property taxes to a new home now have direct access to additional tax relief options. 

Proposition 19 Popular Property Tax Relief Expansion

Some previous tax benefits are now expanded. A transfer by homeowners when purchasing a new, higher priced primary residence, with adjusted numbers to update values, no longer has to be a home of equal or lower value; and a property transfer like this can be implemented up to three times, not merely once as with previous limitations.

Victims of natural disasters verified by the Governor of California no longer have any limits, as far as counties are concerned. There tax breaks can now be used in any of California’s 58 counties, no longer limited to ordinance approved counties as before – and may be utilized between any two counties, from original home to new property.

New Proposition 19 Property Tax Relief Opportunities 

As long as Californians qualify for, and file, their Homeowner’s Exemption or Disabled Veterans’ Exemption inside 12 months of transfer of ownership; plus make an inherited home their principal residence, as opposed to an investment property – they can avoid property tax reassessment.

Moreover, they have plenty of time – 12 months, to move in. Also, family farm transfers are permissible under this exclusion – without having to move in as a primary residence.

However, due to the possibility of triggering reassessment and being hit with current tax rates, it’s critical to enlist the assistance of a trust lender like the Commercial Loan Corp in Newport Beach for instance, to determine if a loan to an irrevocable trust, in conjunction with Proposition 19 tax breaks, will serve as a reliable means to keep an inherited home from parents with a low Proposition 13 protected property tax base. 

There is also a superior financing solution available to buyout siblings who wish to sell their inherited property shares… at a much higher price than an outside buyer would offer, thanks to the elimination of a realtor managing the process, and their 6% fee, plus pricey legal costs; etc.

Keeping a Low Property Tax Base With an Irrevocable Trust

It’s crucial to enlist the help of a tax attorney, or a property tax consultant, or a trust lender, to find an alternative tax avenue –     to avoid egregious tax hikes at current reassessed rates.  For example, a CA family home assessed today at $50,000 – with a yearly property tax of $600 – could actually be re-assessed today at $750,000 – with an annual tax burden of $9,000!

An experienced trust lender can help middle class families with an irrevocable trust, working in conjunction with Proposition 19 and Prop 13, to establish a low property tax base, and even buyout property shares from co-beneficiaries.  We’re talking about homeowners that have on average less than $700 in the bank at any given time; who don’t  have deep pockets… who need to avoid severe property tax increases, with the danger of possibly losing a beloved house due to an inability to pay for such yearly taxes.

Even a regular trust, like a Qualified Personal Residence Trust,  permits  a parent to transfer a primary residence to a trust that allows that residence to be occupied by that parent for a set amount of years. At the close of that set number of years, the residence transfers back to the heir and when that heir becomes the sole owner, they qualify for a parent-to-child exclusion, as a primary home owner.

CA Property Tax Relief Options With Trust Lenders

Besides assisting beneficiaries with a parent-child exclusion and a low parental property tax base, a trust lender will help sibling co-beneficiaries looking to sell inherited property with trust loan funding that will provide them with far more cash than an outside buyer would offer – otherwise known to realtors and attorneys as “buying out a sibling’s share of inherited property” or a “sibling to sibling property transfer” as well as a “transfer of property between siblings”.

A seasoned property tax consultant like Michael Wyatt Consulting or a trust lender specializing In loans to trusts and estates such as Commercial Loan Corp, for example, can help families inheriting real estate in California to fully understand how to safely avoid property tax reassessment, plus how to transfer parents property taxes on a standard Proposition 19 property tax transfer when inheriting property taxes.  Likewise, how to keep parents property taxes basically forever, utilizing a parent-to-child transfer and a parent-child exclusion under Prop 19. Prior to 2021, a parent-child exclusion was strictly under the auspices of the wildly popular Proposition 58.

Again, this is where a trust lender comes in very handy (frequently referred by a property tax consultant or an estate lawyer – to insure that each critical step along the way is taken correctly, keeping a low property tax base; avoiding property reassessment.

Establishing a Low Property Tax Base in California

Property Taxes in California

Property Taxes in California

Establishing a Low Property Tax Base ~ Who to Turn to in 2022

It’s always interesting, with respect to estate funding and inheritance financing, how different schools of thought come up with different solutions for saving money on property taxes, for out-of-the-box funding solutions against inheritance assets, and for mortgage capitalization. 

Name brand name lenders, setting the tone  for most lenders in California, such as Quicken Loans, e-Loan,  Wells Fargo and Bank of America – are admittedly all high-end, reliable finance-information and lending sources.  Yet – when it comes to important income tax or property tax matters, or inheritance funding solutions – their editors and writers, talented as they may be, still only nibble around the edges on anything but the most conventional, largely ineffective solutions. 

For example, where tax relief is concerned these firms typically dance around the critical issues associated with property tax exemptions, establishing a low property tax base, or avoiding property tax reassessment – when inheriting a home in any of the  58 counties in California. So who do we turn to for help?

Many property owners embrace basics, and enlist assistance from established property tax experts such as Rachelle Lee-Warner, Esq. — well known Partner, Managing Attorney & Trust Administration / property tax relief expert at Cunningham Legal. Or trusted property tax consultant Michael Wyatt, President of Michael Wyatt Consulting in Corona. Or a reliable trust lender like Commercial Loan Corp, led by inspirational CEO, Kerry Smith in Newport Beach – specializing in irrevocable trust loans, avoiding property tax reassessment and establishing a low  property tax base – for middle class California families… guiding them through while showing them all the new advantages that Proposition 19 offers.  Perhaps not as generous as Proposition 58 might have offered… however, lowering property taxes to a greater degree than you might think.

Avoiding Poor Solutions and Time-Wasters 

With regards to lowering property taxes — these are typical solutions from “expert websites” that homeowners might not want to take very seriously, or avoid completely…

  • Limiting your “home improvement” projects;
  • Researching nearby neighborhoods for pricing and home values;
  • Asking uninformed young attorneys or relatives (to save money) if you qualify for tax exemptions;
  • Walking around your neighborhood with your Tax Assessor;
  • Checking your tax bill for inaccuracies;
  • Getting a second, third and fourth opinion from unproven  Assessors and property tax consultants;
  • Meeting with your local Tax Assessor to convince him/her to revise your tax bill;
  • Researching and filing a property tax appeal challenge with your County Tax Assessor without a professional property tax appeal firm – on your own, simply to save money.

Checking for inaccuracies, or getting a second opinion isn’t a bad suggestion.  But walking through your house with your local Tax Assessor?  Researching prices around your neighborhood? With all due respect to the financial websites that hand out this kind of advice, these suggestions would be laughable – if they weren’t so serious.  Limiting your home improvement projects – to lower your property taxes? 

Effective Solutions with a Tax Professional or a Trust Lender

We will never be free from property taxes while we own our own home, but one does need to be on the there are a few simple “tricks” you can use to lower your property tax bill, as certain websites claim. 

We can investigate comparable homes in our neighborhood for “discrepancies”. Never making any changes to our property exterior right before a tax assessment, as this can increase the value of our property; hence increase our property tax bill.

Or, we can stroll around our house and chat with our Tax Assessor during our yearly assessment. That makes a lot of sense. Lastly, we can look for local and state exemptions, and, “if all else fails, write up and file a tax appeal to lower our property tax bill”  so suggests a well known financial site.  Listen, if we’re going to file a property tax appeal with a County Tax Assessor, we’d be a lot better off doing it through a professional property tax appeal firm.

If we want to address this issue seriously, and not simple throw silly and unrealistic suggestions out there simply to see what sticks – we have to look at realistic opportunities to take advantage of. 

For example, if we’re an heir of an estate, or a trust beneficiary inheriting a house from our Mom or Dad – and the house is in an irrevocable trust – a loan to an irrevocable trust from a trust lender is likely required if the trust does not contain sufficient cash to make an equal distribution to all of the co- beneficiaries looking to sell off their inherited property shares. This is frequently taken advantage of by beneficiaries, perhaps like yourself, who intend to keep a home inherited from a parent at the original low property tax base.

A loan to an irrevocable trust makes it possible to buyout inherited property shares from co-beneficiaries and greatly speeds up the trust distribution process. A trust loan also saves a great deal of money when you compare selling the family home through a realtor or broker receiving a 6% commission, plus legal fees, and other closing costs.

Inheriting Parents’ Home While Keeping Their Low Property Tax Base

Bottom line, avoiding property tax reassessment  and establishing a low property tax base by transferring property taxes, are property tax relief benefits available to all property owners in California, protected by Proposition 19 & Proposition 13. This should always be taken full advantage of.  You can transfer parents property taxes when inheriting property and inheriting property taxes – and keep parents property taxes basically forever, establishing a low property tax base with Prop 19 benefits as well as taking advantage of a trust loan buyout of property inherited by siblings. Why not?  It’s your right.  Plus, there is no better time than the present to become better acquainted with the parent to child property tax transfer.

This type of property tax transfer is at the foundation of property tax relief for all Californians, generally through a parent to child property tax transfer on an inherited home – usually referred to as a Prop 19 parent-child transfer or parent-to-child exclusion… all the way to a transfer of property between siblings through a loan to an irrevocable trust, in conjunction with Proposition 19 – with an entire year to settle in to an inherited principle residence, or multiple residence (although only one heir is actually required to lock this tax relief benefit in). As long as the parent leaving that property to heirs resided there as a principle residence as well – which is usually the case anyway.      

Using a Trust Loan to Establish a Low Property Tax Base

Buying out sibling property shares while keeping your inherited home at a low Proposition 13 tax base is a popular avenue for many families.  Not only that, if your siblings are receiving funds from an irrevocable trust to sell their inherited property shares, they would receive far less money getting cash from an outside buyer, as opposed to funds from an irrevocable trust. The costs associated with preparing a home for sale, expensive realtor fees, and potential closing costs associated with selling an inherited home can be incredibly expensive.

When a trust loan is used to facilitate a trust distribution, each beneficiary receives an average of an additional $15,000.00 in distribution when compared to selling the home. The person keeping the family home also benefits – saving $6,200+ per year in property tax savings – simply by avoiding property tax reassessment on a nice old inherited home from Mom and/or Dad.

Voters passed CA Proposition 19, just squeaking by with a handful of votes from confused voters in Nov of 2020, and the tax measure became active on April 1, 2021. If you want to intake good advice and avoid mistakes, have property tax experts carefully walk you through Proposition 19, and Proposition 13.

Most middle class and upper middle class California homeowners probably have heard about Proposition 19, the new property tax law that allows seniors and disabled homeowners to keep their current property tax rate when they sell their home and buy a new one. But they may not know how to apply this new law when moving to a new home.

It’s the state’s largest expansion of property tax benefits in decades, basically allowing qualified homeowners to take their Proposition 13 tax base with them anywhere in the state, no matter the price of their new home.

Helping California Middle Class Homeowners Avoid Property Tax Reassessment

Under Prop. 13, tax hikes are capped at 2% a year, meaning the longer you own your home, the lower your property taxes relative to the market value of your home. But some homeowners lose their Proposition 13 tax break when they sell their old home and see their new tax jump to the full market value of their new one.

If you are 55 years or older, a person with a severe disability or a victim of wildfires or natural disasters, you can move to any home in the state, regardless of the home’s price. Your tax is unchanged up to the value of your old home. If your new home costs more than your old one, you pay an additional amount based on the market value over your old home’s price.

When you’re used to a low property tax bill, it can be a shock to your monthly expenses when buying a replacement home includes a huge property tax increase – especially if you have lived in your current home for many years.

Some older middle class homeowners feel trapped because they can’t leave their current home, even if it no longer fits their needs, because they are on a fixed income like Social Security, or a modest pension or military retirement, and can’t afford to move. Taking advantage of Proposition 19 may appear challenging.  But as time passes, more and more tax assessors are providing online links to forms and resources to help homeowners understand how to benefit from these new property tax rules and regulations.

 

Helpful Contact Info for a Property Tax Transfer on an Inherited Home

Property Tax Transfer in California

Property Tax Transfer in California

Commercial Loan Corp – (877) 756-4454 – cloanc.com

As most property owning Californians are aware in 2021, both time-honored and new cost-cutting property tax breaks are accessible to home owners over age 55, who have a severe disability, or who are verified victims of a natural disaster or forest-fire – as far as new property tax breaks are concerned.

Moreover, when inherited property is in an irrevocable trust and additional cash is required to make fair and equal distribution to all beneficiaries determined to sell their inherited property shares – a trust lender like Commercial Loan Corp is where such beneficiaries go for irrevocable trust funding, along with getting help from the firm to work in conjunction with Proposition 19; to insure inheriting a low property tax base, to avoid property tax reassessment both in the short and long run.

This process also allows beneficiaries looking to keep an inherited home to buyout inherited property from siblings at much higher rates than any outside buyer would offer, given that there is no realtor involved, with their 6% fee; and no pricey legal bills and ancillary costs associated with an outside property sale. It costs beneficiaries less in every respect with a Proposition 19 trust loan from Commercial Loan Corp, then it does if they were to use their own cash to complete the property transfer process, to insure inheriting a low property tax base.

Senior Account Manager – trust loan and property tax relief specialist – Tanis Alonso recently shared her viewpoint on this process with us recently. She explained as follows:

Let’s say a property value is currently one million dollars and the current tax base is $1,200. If they were to get reassessed at current value that would be around $11,000 annually. By someone keeping the property and obtaining a trust loan to properly buy out their siblings that allows the beneficiary that is keeping the property to keep parents property taxes, to retain 100% of the Proposition 13 tax base that was paid by their parents and keep that low property tax base of $1,200.

This of course creates much greater affordability than if they were to improperly buy out their siblings and have that property reassessed. The loan to trust goes hand in hand with the Proposition 58 property tax transfer system, creating enough liquidity to equalize distributions, not sell, and allow a beneficiary to keep their parents property with their low property tax base.”

Michael Wyatt Consulting – (951) 264-6152 – michaelwyattconsulting.com

For 25 years well known California property tax specialist Michael Wyatt has managed countless real estate transactions that have had various unintended results. Property owners either did not have the benefit of an estate attorney, or the folks advising them were unfamiliar with property tax relief and assessments, property tax law, tax breaks and their consequences.

Mr. Wyatt started Michael Wyatt Consulting to help advisors and clients avoid unintended consequences, by structuring their real estate for property tax cost savings and avoiding crippling property tax reassessment.

The firm provides services for the decline in value of properties; for base year value transfers for property owners; plus the Transfer of Base Year Value for homeowners age fifty-five or older; as well as severely and permanently disabled residents and Change in Ownership Exclusions.

There also is Interspousal Transfers, Inheriting a Low Property Tax Base; Parent to Child Property Tax Transfer; Family Joint Tenancy and Inter Vivos Revocable/Family Trusts; the Proposition 19 (formerly Prop 58) Parent-to-Child Exclusion and Grandparent-Grandchild Exclusion (Propsition 193); the New Construction Builders’ Exclusion; plus Exempt Property; Eminent Domain & Condemnation –

To be clear, Condemnation is the process a government or private entity uses to legally acquire property. Authorities can condemn properties through eminent domain to seize property from their owners. Eminent Domain allows a property to be seized for public use such as highways, railways, airports, powerlines, and pipelines.

Mr. Wyatt tells us:

Commercial Loan Corporation loans to trusts give our clients several invaluable benefits. Their terms can be a lot more flexible than an institutional lender like Wells Fargo or Bank of America. Also, Commercial Loan Corp is self funded, and that’s basically why they can extend easier terms to clients. Compliance for both commercial and residential property owners is far less strict. Commercial Loan Corp doesn’t charge any fees up-front, that’s another great benefit. Plus, they don’t require paying interest on their trust loan in advance.

The speed of their trust loans is much faster, typically five to seven days instead of two or three weeks. And if you sold a property outright, without using a trust loan, you have closing costs, legal fees; a commission; etc. It gets very expensive. Going with a firm like Commercial Loan Corp – all costs are offset, unless you plan to keep a property for 2 or 3 years or less. Then it doesn’t make sense. But generally you’re looking at keeping that property for seven or more years, as a rule.”

Cunningham Legal – (949) 386-1340 – www.cunninghamlegal.com

Rachelle Lee-Warner Partner & Managing Attorney for Estate Law and Trust Administration at Cunningham Legal, although a well known Trust and Estate Attorney, also functions to a some degree as a property tax consultant. No matter how many people she helps, Miss Warner never loses sight of the fact that no two cases—or people — are alike; and sums up her role as follows:

I want to be known as an attorney who treats each client like they are my only client. Each situation is unique and each client deserves to be heard and offered the assistance we can provide. I often meet with clients who are in the midst of stressful and emotional situations. Whether it be the declining health or loss of a loved one, my goal is to be a voice of reason, a calm presence, and an encourager through the process. Helping these clients gives me purpose in my career.”

“One of my clients was in hospice care and had an A/B trust with property in the B Trust carrying significant gain since her husband had passed away,” offers Rachelle as an example. “If left intact, her daughters would pay hundreds of thousands in capital gains taxes. I was able to get an ex parte petition filed and granted within two days to eliminate the capital gains taxes for her daughters. My client died a few days later, and her daughters were so grateful we sprung into action to save them money and give their mother peace in her last few days.”

After two pivotal events in my life — becoming a mother and losing a parent — my perspective shifted events helped shape me to understand more clearly the perspective of my clients and my clients’ needs.”

Why Consulting With an Attorney, a Property Tax Specialist or Trust Lender is Crucial Now, When Inheriting a Home in California

Inheriting a Home in California

Inheriting a Home in California

When inheriting a home from parents, one should always have a reliable estate attorney, if we’re looking to transfer a parent’s property taxes or we’re inheriting assets in trust or in a standard estate or probate; with an experienced eye on all  proceedings, especially the process of “equalizing trust loan distribution among beneficiaries” if a trust loan is a part of the process – a phrase often used by property tax specialists, and frequently misunderstood by heirs and beneficiaries.

“Equalizing trust loan distribution” simply means that each heir or beneficiary / sibling intent on selling their shares of inherited property  left to them by a parent, will receive an equal amount of money… settling expenses when there is little or no cash in the trust. 

Paying off a debt that a parent or grandparent has on a home can impact beneficiaries looking to borrow, as well as lenders. Having a competent attorney who knows how to structure a trust so that beneficiaries looking to keep inherited property at their parent’s low property tax base can retain that family property… while making sure that co-beneficiaries intent on selling their inherited property get an equal share of cash from a loan to an irrevocable trust.

This is where an experienced trust lender comes into play, preferably a lender that provides trust funding with their own capital, which ensures that interest charged will be as low as possible. Not using expensive money from investors, lenders with their own capital are free to charge as little as they wish, in terms of fees. In fact, a trust lender like this is free to exercise extreme flexibility with underwriting, maintaining particularly reasonable terms and conditions; as well as being able to implement trust loan transactions quickly, in seven to ten days.

It’s always worthwhile to hear what an experienced property tax relief specialist, in this case property tax consultant Michael Wyatt at Michael Wyatt Consulting in Corona CA, has to say about working with an established trust lender that typically provides five and six figure irrevocable trust loans with their own private capital –

A private money lender that loans to irrevocable trusts, applies for and works in tandem with California Proposition 19… So all the beneficiaries [in the family] who are looking to sell their real property shares – for the purpose of facilitating “non pro-rata distribution”, in other words getting an equal share of the entire overall estate – however not necessarily of every asset.

If there is a family that goes to a conventional, pricey lender like Wells Fargo for instance – they will always require adult children, beneficiaries that want to sell an inherited property, to ‘go off-title’, and that always triggers present-day tax reassessment. And that spells an expensive 66.66% tax hike!

If the family in question uses the Commercial Loan Corp, a company we have been using for years… the loan they provide is to a trust, and not to beneficiaries; so there is no title, and no crippling 66.66% property tax reassessment. Their terms can be a lot more flexible than an institutional lender like Wells Fargo or Bank of America. Also, Commercial Loan Corp is self funded, and that’s basically why they can extend easier terms to clients.

Compliance for both commercial and residential property owners is far less strict. Commercial Loan Corp doesn’t charge any fees up-front, that’s another great benefit. Plus, they don’t require paying interest on their trust loan in advance. Not only that, there is never a “due-on-sale” clause… that requires the mortgage to be repaid in full when sold; or that all or some of the interest owed must be paid up-front to secure the mortgage. No “alienation clause”… in the event of a property transfer, stating that the borrower has to pay back the mortgage in full before the borrower can transfer the property to another person. There is none of that.

Having access to private capital, along with seasoned advice, and expertise from a property tax consultant and a trust lender on how to transfer a parent’s property taxes,  becomes even more crucial in an inheritance scenario when a family is looking to keep a family home for a long period of time. 

California Proposition 19, which was (voted into law in 1986) formerly California Proposition 58, can enable a parent-to-child home transfer of a “principal residence” to be excluded from property tax reassessment even if associated with a “change in ownership”.  Which could trigger reassessment of property taxes, often by accident, resulting in  property tax reassessment – if not for experienced guidance from a trust lender and, frequently, from a property tax consultant or tax attorney as well, guiding the trust loan process and  property tax transfer; working in concert with Proposition 19 and parent-to-child exclusion (from high current  market rates).

Advice from property tax transfer specialists like this generally includes guidance for beneficiaries and new home owners within the process of being able to transfer a parent’s property taxes, plus showing inheritors what they need to do to keep parents property taxes when inheriting property and subsequently inheriting property taxes from a parent.

Michael Wyatt Consulting may be contacted at (951) 264-6152 for questions on retaining a parent’s low property tax base; and how to transfer a parent’s property taxes, through CA Proposition 13; or with questions about getting a loan to a trust, in conjunction with CA Proposition 19.