Keeping Your Parent’s Low Property Tax Base When Inheriting a Home

Keeping Your Parent’s Low Property Tax Base When Inheriting a Home

Keeping Your Parent’s Low Property Tax Base When Inheriting a Home

How to Keep Parents Property Taxes In 2021

What was once the parent-to-child property tax break called CA Proposition 58 has now morphed into a property tax relief measure to help avoid property reassessment, called CA Proposition 19… active as of Feb 16, 2021.  

Estate and trust lenders are accustomed to teaching beneficiaries and new homeowners freely, in unfettered fashion, how to keep parents property taxes with Proposition 13 or Proposition 58 property tax breaks. But they are still funding trusts with a loan to an irrevocable trust, and helping clients to establish a low property tax base, to avoid property reassessment… Property tax specialists like this are still helping beneficiaries buyout a sibling’s share of inherited property, through a trust loan – the transfer of property between siblings. 

Property tax relief experts are still showing beneficiaries how to keep parents property taxes on a property tax transfer, taking advantage of the parent-to-child transfer or parent-to-child exclusion (from current property tax rates); helping families inheriting a home to transfer parents property taxes when inheriting a home, and inheriting property taxes. 

Help From Experts  

Some California firms with property tax relief expertise have been encouraged to get creative, to meet new property tax challenges and obstacles head on.  Firms such as real estate issues and property tax relief; or well known trust lender and Prop 58 / Prop19 experts Commercial Loan Corp in Newport Beach, who specializes in irrevocable trust loans and lending.  This particular trust lender is now offering heirs and beneficiaries inheriting a home from parents a free consultation for property tax savings – to help beneficiaries inheriting a home from parents to keep the parents’ low Proposition 13 property tax base; while also taking full advantage of Proposition 19 and Proposition 58.

This type of evaluation for property tax savings is designed to simplify a relatively complex process, helping heirs evaluate the benefits of a loan to an irrevocable trust, specifically for beneficiaries who want to buyout siblings’ inherited property shares, while keeping inherited property at their parents’ low property tax rate – as well as avoiding costly expenses associated with selling property through a realtor.  

The name of the game is to simplify the use of Proposition 19, as well as the transaction between trust lender and beneficiary. A process that is often difficult for families to understand.

Inside View From an Account Manager’s Perspective

One such seasoned proponent of simplification of the Proposition 58,  trust loan process is a highly experienced account manager by the name of Tanis Alonso – a particularly hard working, dedicated senior manager, who works closely with her clients, and frequently their estate lawyer or accountant.

In a recent interview with this blog Miss Alonso described her unique personal approach to planning and implementing estate & trust loans for families; how property tax saving trust loans and Proposition 58 tax breaks factor into her family undertakings and financial proceedings, Miss Alonso tells this blog:

We don’t view each trust loan scenario as simply a ‘financial transaction.’ Nor do we see the home they’ve lived in for decades as just a ‘piece of real estate’. To us, this a ‘piece of family history’ in the making. And the process a ‘family decision,’ not a ‘transaction’…

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.

Feedback From A Seasoned Property Tax Consultant

We let our clients know the Proposition 58 [or Proposition 19] tax benefit entitles children of parents leaving them property to preserve the low Proposition 13 maximum 2% tax base. A California property tax transfer. However, a lot of people don’t fully understand that you have to apply for the benefit. It’s not automatic. And it doesn’t apply to the principal home. explain to them that they get the assessed value tax benefit only if it’s a non principal home. You get the assessed value waved if for example it‘s a million dollar property… You get the million excluded – but the overage is reassessed… A lot of people don’t know that.

The creators of the trust get this benefit. definition of ‘a child’ or “children” is typically the adult children of a decedent…But this also refers to step-parents. Step-parents can also transfer property to a step-child… Mom can be a step parent and can still get the benefit. In-laws get the benefit as well. You don’t have to be blood relatives.

We basically introduce the trust lender, for example Commercial Loan Corporation, as a private money lender that loans to irrevocable trusts, that applies for and works in tandem with California Proposition 58 [or Proposition 19]… for beneficiaries who are looking to sell their real property shares – for the purpose of facilitating “non pro-rata distribution”… So every heir gets an equal share of the entire overall estate – however, not necessarily of every asset.

Well, if the family in question uses the Commercial Loan Corp company that 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.  Well, for example, there might be three siblings… beneficiaries – and a house to inherit. And this is always important to remember.

If you’re one out of the three siblings that wants to keep the inherited house, you are definitely looking at a 66.66% property value tax reassessment – if you’re operating without a loan to a trust, or you’re using your own cash; or getting money from a very pricey institutional lender – typically with multiple restrictions and extremely strict terms.”

At the end of the day, all families need to understand is the fact that in the end, they save a great deal of money on property taxes if they aim to keep their parent’s home.  If they are looking to sell, they simply need to understand that they will be putting lot more cash in their pocket  using the trust loan approach, rather than selling to an outside buyer.  Everything else is secondary, if you are inheriting property.

If you are interested in finding out how much you might be able to save by keeping a parents low Prop 13 property tax base on an inherited home, we suggest you contact Commercial Loan Corporation at 877-756-4454. They will provide you with a free estimate on what your annual property tax savings will be and provide you with information on the Proposition 19 process.  They can even put you in contact with a trust and estate attorney in your area if needed.

The California Proposition 19 Newspaper Debate

California Proposition 19

California Proposition 19


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

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

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

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

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

And in opposition…

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

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

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

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

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

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

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

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

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