Tag Archives: Parent-child transfer

Homeowners Make the Best of New Property Tax Measures in California

Posted on by
Reply
Property Tax News

Property Tax News

In Nov 2020 voters in California were presented with a new property tax measure… Proposition 19.  So in addition to a Prop 19 parent child exclusion, a mission was apparently added to help fire-fighters; providing seniors and disabled homeowners with property tax breaks,  along with folks over 55 who have suffered property damage from a natural disaster such as flooding, or an earthquake.

Californians Still Have Property Tax Relief to Turn To

Despite several limitations, parents in California can still transfer property they own to beneficiaries, with parent’s low property tax base since the parent-child transfer provides grown children with an exclusive property tax break that provides exclusion from property reassessment – thereby avoiding or minimizing property tax reassessment.

This also applies to grandparent to grandchild beneficiary transfers… However, necessitating that both parents of the beneficiaries must be deceased to qualify the grandparent-to-grandchild exclusion, or exemption.

Under new property tax requirements under Proposition 19, a parent must have lived in the residence being transferred, usually via inheritance to beneficiaries… as a primary residence. And must have filed a “homestead exemption” for the inherited property going to their beneficiaries.

An inherited home can be valued up to $1,000,0000; with the beneficiary prepared to move into the home within one year as a primary residence; plus claim a homeowners’ exemption – in order for the property transfer to be excluded from property tax reassessment.

Prop 19 Favors Seniors, and Folks with Bad Luck or Poor Health

Under Proposition 19 homeowners age 55 and up, severely disabled, or victims of wildfire or a natural disaster, can buy a new primary residence anywhere in California up to three times, and transfer their lower property tax basis from their existing property to their new property. The new property has to be of equal or lower value of the original property being sold.

This is all in addition to, not replacing, the old Proposition 58 property tax benefits that provide Californians with the ability to avoid a sibling to sibling buyout directly, while still being able to buyout siblings and retain sole ownership of inherited property… all the while managing to  avoid property reassessment with a parent-child transfer… with the right to keep parents property taxes (low property taxes) through a Prop 19 parent child exclusion in California.  A property tax transfer is still accessible for all Californians inheriting property from parents, while at the same time inheriting property taxes.  In other words, inheriting property while keeping a low property tax base

Even though a Prop 19 parent child exclusion is subject to certain new limitations… as long as one stays in compliance — the property tax breaks are there to take advantage of. Which is why many beneficiaries work with a trust lender to buyout co-beneficiaries,  retaining sole ownership of inherited property along with minimizing their property tax reassessment…. Moreover, so beneficiary property disputes can be resolved by a loan to a trust.

Estate Taxes

On the other hand, if a beneficiary sold his or her inherited property after the date of parental death, capital gains tax would be low, if any.  The estate tax for 2021 was capped at $11.7 million… Estates valued at less than $12.06 million in 2022 for individuals are exempt from an estate tax.

Every property owner in California resident is allowed to gift a certain amount of property per year, tax-free.  In 2021, this amount was $15,000, and in 2022 this amount is $16,000. There is a good chance estate taxes will not be imposed, looking ahead… unless the estate tax cap is revised… And that’s highly unlikely in the foreseeable future.

Inheriting Your Parents’ California Home with a Low Property Tax Base

Posted on by
Reply
Inheriting Your Parents' California Home with a Low Property Tax Base

Inheriting Your Parents’ California Home with a Low Property Tax Base

Let’s face it – Proposition 19 isn’t Proposition 58… However, we can still make use of favorable property tax relief benefits under Prop 19, such as inheriting CA property taxes; as long as we abide by the new rules & regs.  Under California’s Prop 13, the County Assessor’s office is not allowed to increase the appraised value of property except by 2% max. Unless there is a “change in ownership”. Even if the valuation of your home goes up.

Maintaining a Watchful Eye on Your Local County Tax Assessor

As the Albertson & Davidson law firm blog illustrates in an example – “If you bought a house in 1995 for $100,000, but that home is now worth $2,000,000; the county tax assessor is not allowed to value your home at $2 million for real property tax purposes. Instead, the value is limited to $100,000, plus a small percentage equal to the consumer price index or 2%, whichever is less…

….as such, the real property probably has an appraised value of around $125,000. The real property tax is approximately 1% of the property’s appraised value. In this example, the real property tax on a house valued at $125,000 is $1,250. Whereas, the real property tax on a house valued at $2 million is $20,000. Proposition 13 effectively saves the real property owner around $18,750 in tax ($20,000 – $1,250). That’s a huge savings… etc.”

Protecting Your Family From Property Tax Reassessment 

In fact, if the original purchase of your inherited home goes back three or four generations, back to your grandparents, or even great grandparents – the tax hike could crippling. Even for an affluent family with higher than average cash flow.  Sure, if you’re on the 1% list, you can absorb this kind of tax hike… But how many people do you know on that list? Are you on that list?

Probably not, as we’re talking about roughly 1% of the public… maybe 2% to 3% of all homeowners in California. And of course this depends on geographical locale – what neighborhood your home is in. If you’re in Santa Barbara, or Santa Cruz, or San Jose, or in the Hollywood Hills, or in Santa Monica or Beverly Hills… you’re likely to be able to weather that type of tax hit.

It sounds complicated, but in fact it’s actually pretty simple.  When someone passes away, say your parents, and the property is transferred as an inheritance to their grown child-beneficiary, the home retains a low valuation, as long as you avoid triggering property reassessment at “fair market” or current rates, by a “change in ownership”… with the help of an estate attorney and a trust lender – through a parent-to-child exclusion… inheriting CA property taxes from parents; avoiding CA property tax reassessment… and saving your family tens if not hundreds of thousands of dollars, now and in the coming years ahead!

Proposition 13 and Proposition 19 will still enable you to retain your parent’s low original tax rate with a valuation of the property’s original low valuation. However, if you don’t do this correctly, your local friendly local County Tax Assessor will reassess the property forward to its’ current value, and inheriting CA property taxes from your parents, at their low base rate, will no longer be possible. 

Getting Financing & Guidance from a Reliable CA Trust Lender

No matter where you live or what your particulars are… If you’re set on keeping an inherited home from your parents, you have to file a parent-to-child exclusion document. In fact, the best way to make sure you do not trigger property reassessment and run into this sort of financial pit-hole, is to work with a reliable trust lender, specializing in loans to trusts and estates – like Commercial Loan Corporation in Newport Beach, where you can get all the help you’ll need to make sure everything goes properly and smoothly…

So you can safely and securely buyout your siblings; and retain sole ownership of your inherited family home – if indeed that’s what you want to do.  Either way, at least you’ll know what your options are, to keep yourself and your family informed and secure… keeping your  most valuable asset – your home – protected!  This is precisely why eligible California homeowners are moving quickly on new CA property tax relief opportunities

Plus, your trust lender and estate attorney (for good measure) will make sure Proposition 19 works perfectly in conjunction with an irrevocable trust loan to result in minimizing reassessment and establishing a low property tax base. Likewise, most Californians agree, without reservation, that Time is Ripe to Become Better Acquainted With the Parent to Child Property Tax Transfer

The #1 Win-Win Property Tax Solution for CA Families  

Everyone wins with an irrevocable trust loan beneficiary buyout solution… and that’s not just marketing-talk. Your co-beneficiaries will end up selling out to a beneficiary intent on keeping the family home, and walking off with an extra $14,000 to $15,000 as opposed to using a realtor to accomplish the same type of property sale.

Also, if your parents are deceased, and the family home is transferred from a grandparent to a grandchild, then the grandchild can access the same exclusion as the Proposition 19 parent-child exclusion.

If you’re an average middle class or even upper middle class homeowner, and not a member of the 1% high net worth club – you’re probably going to want to take advantage of an exclusion from reassessment.  Plus, you’re going to want to be able to access your right to keep a low property tax base by avoiding property tax reassessment, to be able to transfer parents property taxes with a property tax transfer — to keep parents property taxes through a parent-child transfer… ultimately inheriting property taxes from parents.

However, there are some pitfalls you need to look out for… The parent-child exclusion has to be filed with the County Tax Assessor inside of three years from your decedent parent’s passing. If you miss this critical deadline you’ll be hit with a “supplemental assessment” that will impose a higher property tax hit on you that includes all the years you did not request a parent-to-child exclusion. Again… it’s always that fine print you need to be aware of!

Whatever happens, if you are set to receive house or other real property from your parent, be sure that your parent-to-child exclusion form gets filed properly and on time. If you miss the deadline, and don’t complete this form correctly, the ramifications can be financially crippling. So be careful!

New Property Tax Relief Laws & Belief in the CA Legislature

Posted on by
Reply
Property Tax Transfers

Property Tax Transfers

Can California rely on Property Tax Exclusions from Prop 19?

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

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

Truth?  Publicity?  Or happy talk… 

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

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

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

Prop19 revenue for city and county fire departments & schools

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

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

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

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

Maintaining the spirit of Proposition 13 and Prop 58

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

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

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

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

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

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

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

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

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

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

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

Article 13-A of the California Constitution

Posted on by
Reply

Protecting Californians From Arbitrary Tax Hikes

Proposition 13 once protected all taxpayers, homeowners and non-homeowners — by maintaining a 2/3 vote requirement in order to pass most tax increases, including state sales and income tax. Intentionally making it more difficult to raise taxes on residents. Particularly critical with respect to property taxes.

Unfortunately for middle class tax payers, a tax measure entitled “Proposition 39” was approved in 2000 by a thin razor edged margin after a massively budgeted PR & marketing campaign was launched by a few Silicon Valley billionaires who thought it would be advantageous to make middle class homeowners pay for their Silicon Valley corporate tax breaks. Similar to our recent tax breaks for mega-wealthy Americans and high-end corporations. Again, mainly pulled from the pockets of middle class homeowners and working families. A sad testament to tax inequality.

So-called “Proposition 39” revised the 2/3 vote requirement for certain bonds to 55% — making it way too easy to pass those bonds, since they are paid back only through increased property taxes. Again, wealthy hands in the pockets of middle class families.

Property Tax Postponement Instead of Property Tax Relief

The State Controller’s Property Tax Postponement Program allows senior or elderly homeowners, blind homeowners,  and severely disabled property owners, to take advantage of a marginally helpful “tax deferment” affecting this year’s property tax bill. When the more equitable solution would obviously be total or partial exclusion from these property taxes; especially in the midst of a severe Pandemic — with subsequent economic failings and short-comings, with no real end in sight.

Over the past 44 years, the Howard Jarvis Taxpayers Association has battled and confronted California based special interest organizations, such as the CA Association of Realtors, groups, bureaucrats, and public-employee unions, among others, who benefit from government spending.

Beginning in 1978, Proposition 13 was determined to protect home ownership from overly greedy, destructive taxation. Therefore California property owners strive to continue enjoying the $528 billion that the Proposition 13 and Proposition 58 (now Proposition 19) Howard Jarvis Tax Revolt has saved homeowners by helping them, overall, to avoid property tax reassessment; allowing families to transfer  property between siblings without a crippling property tax reassessment, avoiding a sibling to sibling buyout.  Enabling beneficiaries to transfer parents property taxes to themselves through property tax transfer relief, when inheriting property, and subsequently inheriting property taxes from a parent — thereby inheriting property while keeping a low property tax base.

Hence, allowing inheritors to keep parents property taxes basically forever… generally with property tax transfer relief from a parent-child transfer — ultimately, through an established parent-to-child exclusion.  Something no California homeowner or beneficiary wants to lose.

How Secure is Property Tax Relief for Californians?

Posted on by
Reply
Property Taxes in California

Property Taxes in California

Despite Critics, CA Property Tax Relief Is As Popular As Ever  

What all homeowners, property owners and working families inheriting property in California want to know – is whether or not property tax breaks from Proposition 13 and Proposition 19 are guaranteed, during our lifetime, to all California homeowners and beneficiaries inheriting property.

Naturally, this encompasses the ability to transfer parents property taxes, with a protected property tax transfer; the right to keep parents property taxes when inheriting property  property taxes, most frequently through a parent-child transfer, otherwise known as a parent-to-child exclusion.  Always to avoid property tax reassessment, even when it involves a loan to an irrevocable trust, in conjunction with Prop 19 for the transfer of property between siblings, commonly called an “inherited property buyout”, which is often implemented in concert with the right to keep parents property taxes.

So after 44 years of capping property tax increases at 2%, Prop 13 continues to be wildly popular with Californians. And due to the fact that Proposition 13 is a CA Constitutional Amendment, it can only be revised by voter approval.

Howard Jarvis Taxpayers Assoc president Jon Coupal tell us:

“Without the two-thirds vote requirement, one of these second-mortgage bonds can now be passed by people who won’t pay the tax and in fact are getting more from the government than they pay in taxes.

After Proposition 39 took away the two-thirds vote protection for these bonds, localities quickly passed almost $30 billion in such bonds — debt that homeowners will be burdened with long after they’ve paid off their homes.  Since then, the two-thirds vote has been repeatedly attacked by a pro-tax coalition that wants to eliminate this protection for more and more kinds of bonds and taxes.

Currently, several proposals are active in the State Legislature to change the state constitution to eliminate the two-thirds vote requirement for other kinds of bonds, and for certain sales and property taxes. If enacted, it will become far too easy to pass all kinds of tax hikes, so the Howard Jarvis Taxpayers Association is actively fighting this legislation.”

Special Interest Groups Intent On Unraveling Tax Relief

Wealthy special interest organizations are out there scheming and planning, especially like-minded people in the realtor community that are secretly, and not so secretly, aiming to unravel California property tax breaks – such as the CA Associations of Realtors, who bankrolled Proposition 19,  replacing Proposition 58 in 2021. 

The CA Associations of Realtors donated $40.4 million to their crusade; and $47.57 million total bankrolled this effort to convince Californians with deceptive yet clever public relations and marketing.  Naturally, there were other organizations that chipped in, that do well with state government cash and don’t want homeowners to save big on property taxes, as property tax revenue feeds those organizations and their financial interests.

Proposition 15, the property tax measure, also promoted by the realtor community, was designed to overturn Proposition 13’s commercial property tax protections, and was defeated by a hair. Had it passed, most residential rentals and business rentals, thanks to inflated commercial property taxes from an unraveled Proposition 13, would have gone sky high – taking prices of all goods and services in California with it…and would have carried the future of California with it…. downhill!

Special interest groups such as the Realtor organizations pushing these anti property tax relief efforts, have got to learn that you can’t weaken and in many cases destroy the lives of millions of the  39,538,223 citizens residing in California – simply to benefit 131,551 real estate brokers. Weakening the financial life of millions just to make some realtors and real estate brokers a little wealthier just doesn’t even out.

CA Property Tax Relief Heroes ~ Fighting the Good Fight

This is precisely why folks such as the Howard Jarvis Taxpayer’s Association; Assemblyman Kevin Kiley and his ACA-9 Bill to repeal Proposition 19;  Commercial Loan Corp led by president Kerry Smith; and others – maintaining an especially courageous effort to control property tax hikes; and keep crippling property taxes capped and equitable for California working families, for both middle class and high net worth homeowners – to keep the California American Dream of home ownership alive, fair, and affordable.

Common Mistakes to Avoid When Transferring a Property Tax Base

Posted on by
Reply
Transferring Property Taxes in California

Transferring Property Taxes in California

The Right Advice & Tax Plan from a Trust Lender 

Much to the relief of Californians who own property and/or are in the process of inheriting a home from a parent, for example, in any of the 58 county across the state, the parent-to-child exclusion from property tax reassessment is still alive and well in all 58 counties, in 2022.

However, quite often, new homeowners and beneficiaries trigger a property tax hike strictly by accident, and end up facing thousands upon thousands of dollars in property taxes from property tax reassessment – that could and should have been avoided, had the right advice and tax plan been in focus.

High property values in California highlight the need for careful property tax planning. If you have owned your property for many years Generally, in terms of property taxes, homeowners who have owned their home for a long time typically have a lower assessed value than current or “fair market” property value tends to be.

Parent-to-Child Exclusion

As far as parent to child transfers are concerned, when one beneficiary who is inheriting a home decides to buyout property shares inherited by co-beneficiaries (siblings) – to have complete ownership of said property – it’s easy to misstep and mistakenly trigger property tax reassessment.

A parent to child property tax transfer in is line with the effort to  avoid property tax reassessment under Proposition 19’s parent-child exclusion, retaining a parent’s Proposition 13 low property tax base. Therefore a loan to an irrevocable trust working in conjunction with Proposition 19 allows us to transfer property between siblings – buying out property from siblings.

Likewise, beneficiaries, upon inheriting property from parents, still have a property tax transfer at their disposal to transfer parents property taxes and keep parents property taxes when inheriting a parental home, and thus inheriting property taxes, but at a low  base rate.  Hence, the use of a parent-child transfer… enabling the use of the invaluable parent-to-child exclusion – bottom line, helping us avoid any possibility of triggering property tax reassessment! 

Choosing the Right  Trust Lender, to Keep a Low Property Tax  Base While Buying Out Inherited Property From Siblings

We prefer a trust lender who can formulate and deliver the more reliable, simple Proposition 19 rules & regs, in conjunction with an irrevocable trust loan to equalize beneficiary buyouts of inherited property shares.

We have found that any type of unconventional property financing other than irrevocable trust loan funding may run into unpleasant surprises such as property tax reassessment – due to an abrupt change in control, or revised ownership!

LLCs, Corporations, or various Partnership entities owning real estate are subject to a myriad of property tax rules & regs that can change on a dime, often disqualifying beneficiaries from taking full advantage of the parent-to-child exclusion, to maintain a low property tax base, and perhaps buying out inherited property shares from co-beneficiaries – avoiding property tax reassessment and running headlong into pricey financial surprises.

Transferring Your Base Year Value Under Proposition 19

Given new changes to Proposition 19, if you happen to be over age 55, or are severely disabled, you may be able to transfer your home’s current base year value to the purchase of a different home, thereby keeping your property tax payments low. To qualify, you must acquire your new home through a sale transaction. If you acquire any portion of the new property by gift or inheritance, you will not be able to transfer your base year value.

Property Tax Relief for All Californians

Posted on by
Reply

Proposition 13 – 34% Against Versus 62.6% For

On June 6, 1978 Proposition 13 passed as a property tax relief measure with 4,280,689 votes for – versus 2,326,167 votes against. In the final analysis, it came down to finally taking a great deal of power away from the County Tax Collectors; and giving it back to taxpayers!

Howard Jarvis and Paul Gann, were the best known Proposition 13 advocates. Officially known as the “People’s Initiative to Limit Property Taxation”,  also referred to as the Jarvis-Gann Amendment,  Proposition 13 was listed for voters through the so-called “California ballot initiative process” – which allows a constitutional amendment to be offered to voters when political advocates assemble a certain number of signatures on  a petition.     

For Once, Tax Relief for the Middle Class in California – Not Special Interests

Many people aren’t aware of the fact that Mr. Jarvis was a hugely successful residential apt. building owner, and Mr. Gann, a political activist who passed away from HIV due to infected blood from a unfortunate transfusion, who ironically devoted the last several years of his life to AIDS treatment advocacy – in direct opposition to his fellow conservatives. California’s “Paul Gann Blood Safety Act” was passed into law in 1990, mandating that doctors discuss the risks of blood transfusion with their patients.

Two non-politicians named Howard Jarvis and Paul Gann courageously soldiered on – without precedence – until they won the day. This rarely occurs in political circles, as we all know.  But for once, some non-politicians actually changed things for the better in California. And virtually overnight, once Howard Jarvis and his so-called “Tax Revolt” passed Proposition 13, property tax rates in California finally became predictable and equitable – from San Jose to San Francisco and beyond, in all 58 counties.

Under this new property tax relief measure, the property tax rate is now set at a uniform 1% throughout the state, and property tax increases are limited to no more than 2% a year as long as the property is not sold.

Previously, the tax rate in California averaged almost 3% of market value, and there were no limits on increases either for the tax rate or property value assessments. Some properties were reassessed 50% to 100% higher in just one year, so property owners’ tax bills skyrocketed, often  way beyond homeowners’ ability to pay their property taxes.

Now, once sold, property is reassessed at 1% of the new market value (usually the sales price) with a 2% cap on annual tax increases. As a result, new buyers are always aware of what their taxes will be and know the maximum amount property taxes can increase each year for as long as they own the property. 

Then, in 1986, Amendment Proposition 58 was passed; and  homeowners as well as beneficiaries inheriting property from parents could happily take advantage of a transfer of property between siblings or sibling-to-sibling property transfer in conjunction with an irrevocable trust loan, typically for buying out inherited property shares from siblings, while keeping a low property tax base (now used with California Proposition 19 which has replaced Proposition 58). 

Overnight, beneficiaries  could transfer parents property taxes when inheriting property taxes; and could keep parents property taxes after a property tax transfer made possible by a parent-child transfer, officially a parent-to-child exclusion which, exactly like buying out inherited property shares, is also now governed by Proposition 19.  

Benefits for Non Property Owners

While Proposition 13 is mainly famous for capping property taxes in California, it also stops arbitrary tax hikes at the state and local level. It makes sure that any state tax increase had to be approved by a 2/3 majority in the Legislature, and any new or increased local taxation must be approved by voters, not just a collection of special interest politicians.

Supplemented by Howard Jarvis Taxpayers Association – a co-sponsored tax measure entitled Proposition 218 (the Right to Vote on Taxes Act) makes sure that voter approval of all new local taxes is required, no matter what. So not just property owners, but also renters, benefit – as Proposition 13 stabilizes property taxes, making them predictable and reasonably controlled; reducing any uncontrolled or unexpected rent increases throughout the state of California.

What Has Made Proposition 13 So Popular, from 1978 to Now?

Posted on by
Reply
Proposition 13 Saves Californian Property Owners Thousands

Proposition 13 Saves Californian Property Owners Thousands when compared to property tax systems in other states.

CA Proposition 13: Consistency and Necessity

In the 1970s property tax hikes were completely out of control. Especially for working families and middle class folks who were dependent on a fixed income… retired veterans and other government and municipal workers like retired postal workers; homeowners receiving Social Security, and retirees living on a modest pension; etc.

During the past twelve months the average home price in California accelerated by over 19%, the California Association of Realtors reports – seemingly unaware that this very statistic belies what they believe is a good thing (the unraveling of Proposition 13 and property tax relief generally in California), in actual fact it’s a good thing for realtors… not the middle class and working families across the state! In fact it shows that Proposition 13 is as necessary as ever.

Stabilizing CA Property Taxes Throughout All 58 Counties  

Kris Vosburgh, Howard Jarvis Taxpayers Association exec director tells us: “It [Prop 13] resulted in the stabilization of neighborhoods and allows people to stay in the neighborhood where they bought homes and not be forced out by increasing tax. The basic benefit to both new and old home buyers is that you know what your taxes are going to be from year to year.  One doesn’t have to shudder in fear.”

And shuddering in fear was exactly what middle class families did when tax time tolled around every year.  You never knew what your tax hike was going to look like. There was no stability in property taxation… No consistency you could rely on.

Before Prop 13: An Epidemic of Elderly & Retiree Foreclosure

In Los Angeles County in 1975 and 1976, over 400,000 senior  homeowners, many who were elderly, in their 80s or 90s, could not pay off their property taxes, simply because they couldn’t afford the accelerated tax rates and were either at risk of being forced onto the street – or literally were put out onto the street with clothes, furniture and all! Many who were elderly folks and nowhere else to go. Not a pretty picture.

Elderly couples and other older individual homeowners living on a modest fixed income were impacted most of all by these arbitrary property tax hikes. Many were living free and clear but were in grave danger of losing their home, despite the lack of debt, mainly because they simply could not afford excessive property taxes.

And as millions of older middle class Californians were being pushed out of their homes, onto the street, the heroic Howard Jarvis assembled over 1,500,000 signatures to qualify a statewide tax measure that would finally end excessive property taxes – and protect home ownership for working families and middle class homeowners – namely, Proposition 13.

California Property Tax Relief: Facts and Case Studies

One story tells the tale aptly, with respect to the urgent, pressing  need California had for fair and equitable property tax relief… It  concerned a 56 year old criminal defense attorney by the name of Cameron Quinn, a Lido Isle resident, who lives there with his wife and 18-year-old daughter.

Beneficiaries of Proposition 13, Cameron’s parents bought his house in 1966 for $45,000. After they died, the house passed to Cameron and the benefits of Proposition 13 were his to take advantage of.  Last year their property taxes were $966 for a home assessed at $95,403. “Where else could we go where it would be less?” Mr. Quinn tells us, “The fact that the taxes are low is a salvation!” 

And of course this eventually included a property tax amendment called Proposition 58.  So with robust property tax transfers in California intact, and both official property tax relief measures working – to avoid property tax reassessment – beneficiaries and homeowners could take full advantage of parent to child property tax transfer opportunities to keep parents property taxes with unfettered ability to transfer parents property taxes; officially known as a basic parent-to-child exclusion from reassessment – all to avoid property tax reassessment on one’s primary residence.

Mr. Quinn calls Proposition 13 “a financial security blanket and a far cry from the Costa Mesa condominium where we first lived, with not much more than a television, a bed and an old piano.”

This home is more than just a product of property tax relief for Me. And Mrs. Quinn. This is where they went after their first date, where his mom, a piano-teacher, and friends serenaded the couple. And just as it passed from Mom to them, this home will be passed again from Dad to daughter. “We wouldn’t move,” said Mr. Quinn’s 57 year old wife Neeta Quinn, “This is where we’re going to live forever.”

CA Parent to Child Property Transfer & Buying Out an Inherited Home From Siblings

Posted on by
1
Avoiding Property Tax Reassessment on an Inherited Home

Avoiding Property Tax Reassessment on an Inherited Home for Californians

Most beneficiaries in California favor a parent to child transfer to avoid property tax reassessment.

As long as a transferred home is, initially, a primary family residence and the offspring receiving gifted or inherited property is moving in as a primary residence,  plus an  exclusion is claimed inside 12 months from change in ownership… remaining aware of the fact that the first $1,000,000 is not reassessed.

At any rate, despite certain limitations, the financial savings from this process  are genuine savings for beneficiaries inheriting property – avoiding property tax reassessment – and for many children of parents leaving a beloved family home to them.  This often makes the difference between being able to keep that family home, or losing it – frequently at a financial loss.

Plus, besides trust distribution to co-beneficiaries to keep an inherited home – also being able to take advantage of property tax breaks such as the right to transfer parents property taxes during a property tax transfer, with the legal right to keep parents property taxes basically forever… after inheriting property taxes through a standard parent-child transfer, and parent-to-child exclusion!

We also have to remember that, in 2022 California, a loan to an irrevocable trust, working in conjunction with Proposition 19, allows a beneficiary to buyout inherited property shares from siblings looking to sell their inherited property… thereby speeding up the trust distribution process. 

Moreover, an irrevocable trust loan also generates a much higher profit margin for beneficiaries selling their inherited property shares, by avoiding expensive home prepping for a sale, as well as avoiding a costly 6% realtor commission, expensive legal fees, and other pricey closing costs.  All in all, avoiding property reassessment, property tax hikes, and higher expenses  in general for all concerned.

When a trust loan is used to process trust distribution to co-beneficiaries, on average each beneficiary or sibling gets an additional $15,000 in distribution as opposed to selling the home to a conventional buyer. The family member keeping a family home also saves money – generally $6,500 or more per year in property tax savings by avoiding property tax reassessment on an inherited property.

That’s why many families inheriting a home from parents go to a reliable trust lender to be able to take full advantage of Proposition 19 tax benefits. Beneficiaries and homeowners continue to take advantage of Proposition 19 and Proposition 13 and basic property tax transfers in California and related tax breaks… keeping a low property tax base when inheriting a home – inheriting property taxes at a low rate from parents.

Saving beneficiaries many thousands of dollars, this is often a life-saver – and could, in many ways, be considered a final act of parental affection, from parent to child.

Understanding New Prop 19 Rules & Calculating Taxable Value

Posted on by
Reply
California Proposition 19 Property Tax Transfer

California Proposition 19 Property Tax Transfer

Parent-to- Child and Grandparent-to-Grandchild Transfers

Prop 58 & Prop 193 allowed parents, and in certain qualified cases grandparents, to transfer their existing property assessments of a “principal” or “primary” residence of any value  without  triggering property reassessment, which is generally required upon a change in ownership – even when real property was used as a rental property by [offspring] beneficiaries.

Prop 58 & Prop 193 enabled assessments of inherited residential or commercial property up to $1,000,000 – covering additional real estate being gifted to, or inherited by, an heir.

Now, under CA Proposition 19 (as of Feb 16, 2022), parents and grandparents can leave their home, with Proposition 13 base year value intact, to their children or grandchildren – as long as inherited property was the primary residence of the parents or grandparents – as well as the primary residence of  the beneficiaries moving into the home that is now being inherited…

Moreover, a beneficiary has plenty of time to move into an inherited home as a primary residence (12 months), plus a good deal of time to file a Homeowners’ Exemption (one year) to qualify for a parent-child or  exclusion.

A Prop 19 exclusion from reassessment of a primary residence of  a parent or grandparent, keeping a low property tax base when inheriting a home, plus all updated requirements, qualify beneficiaries for these types of base-year-value transfers; avoiding property tax reassessment and enabling these new homeowners with the right to transfer property between siblings through a loan to an irrevocable trust; plus all the usual property tax relief bells & whistles that go along with property tax transfer. 

Naturally, this includes the right to transfer parents property taxes and keep parents property taxes by inheriting property taxes generally through a parent-child transfer and parent-to-child exclusion (from paying currently reassessed property taxes).


Selling An Old Home – Distributing Cash Equally Among Heirs

A trust loan from a trust lender, to create equal cash distribution for co-beneficiaries looking to sell off their inherited property, can help those beneficiaries  become sole primary owners of an inherited residence.  Moreover, a primary residence homeowner in California over age 55 can transfer a low property tax base to a “replacement residence” (that is also a primary abode).

In order to qualify for a CA Prop 19 exclusion from reassessment (of your property taxes) – at the same time keeping your parents’ low property tax base – distribution of your trust funds to all beneficiaries have to be equal… especially when it comes to beneficiaries that are selling their inherited property shares to a co-beneficiary inheriting the same property. Each sibling must get the same amount whether it is cash, equity or other assets – to qualify for a Prop 19 exclusion from reassessment.

Many times the trust or estate will not have enough cash or other assets to make an equal distribution.  In these situations the trust or estate can borrow the money from a third party (not the person taking the property) and use the loan proceeds to pay off the other siblings’ share.

A Commercial Loan Corp Trust Loan Calculator will demonstrate “how long it will take for the property tax savings to cover the costs of a loan from a third party. One needs to be fairly certain they will live in the home longer than the time it takes to break-even on third party loan costs or have a plan to transfer the low tax base to another property after the sale of the parents’ home.”