The Function of a CA County Assessors Office

The Role of the County Assessors Office

The Role of the County Assessors Office

The CA County Assessor’s Job

As we all know, property taxes in California are determined by the value of our property. Every county Tax Assessor has to identify and calculate the value of many different types of taxable property in all 58 counties in California, as well as deal with property tax appeal challenges, as they come into the Assessor’s office.

The Assessor has always been independently elected in California, and is supposed to be completely objective, working for the people (i.e., voters) in each Assessor’s county – to be able to avoid political or financial influence from any governing county body; to avoid coercion from any city, school or district to accelerate the number of county tax assessments in order to generate more property tax revenue.

Principle Tax Assessor Responsibilities

The Assessor is charged with making sure property owners in California are taxed at the appropriate rates; ensuring that county public services are receiving the funding they need to continue functioning. Tax Assessors have to locate real property, land, various taxable structures via maps, which reveal every known land parcel, along with an “assessment roll”, which details improvements on property as well as ownership. It’s worth noting that household furnishings, livestock for the most part, and business inventory are no longer considered “taxable property”.

Four critical duties Tax Assessors must address are:

1. Locating taxable property

2. Identifying the owners of all taxable real estate

3. Determining the assessed value of all taxable property

4. Publishing yearly assessment rolls, plus supplemental reporting

Locating Taxable Real Estate

The Assessor must locate real property, land, various taxable structures via maps, which reveal every known land parcel, along with an “assessment roll”, which details improvements on property as well as ownership. It’s worth noting that household furnishings, livestock for the most part, and business inventory are no longer considered “taxable property”.

Property Assessment:

Since 1978, California’s property tax system (under state constitution Article-13a), is typically referred to as Proposition 13; with an Amendment in 1986 adding Proposition 58 to the process which provided a parent-to-child exclusion, and allowed beneficiaries to buyout property shares inherited by co-Beneficiaries… abruptly replaced and somewhat altered in Feb of 2021 by Proposition 19; although still providing homeowners and beneficiaries with property tax relief from property tax transfer benefits avoiding property tax reassessment with the right to transfer  and keep parents property taxes when inheriting a home, and  thus inheriting parents’ property taxes with the help of a parent-child transfer, and parent-to-child exclusion from current, or “fair market value” tax property rates.

Proposition 13 evaluates real estate at the 1975 “fair market value”, including factoring in heirs inheriting parents property taxes; with yearly increases curtailed at a 2% or the inflation rate, as measured by the CA Consumer Price Index – or whichever is less.

Real property is reappraised by the Assessor for tax purposes only when there is a change in ownership; new construction on property has been completed; new construction has not been finished as of the “lien date” (Jan 1); or market value has dropped below Proposition 13 factored value on the lien date.

Reappraising Real Property in California

When any taxable property is reappraised due to change of ownership a Tax Appraiser will examine sales of similar properties. Or if the property happens to generate revenue, the Appraiser will execute “an income approach”. If the real property in question is original and unique the Appraiser could potentially use the amount of money, or budget, the property owner spent on construction – or perhaps research industry-wide studies on similar construction, and use those costs instead to base the appraisal on.

As soon as that property has been evaluated, the property owner will be contacted and notified of the new property reassessment, or evaluation, and will be given the opportunity to review and discuss with the Assessor. If the property owner happens to disagrees with the reassessment, the property owner can always apply for a property tax appeal or “revised assessment” with the local Board of Assessment Appeals.  Or enlist the help of a property tax appeal firm.

Property like boats or airplanes are assessed every year based on up-to-date Blue Book information distilled from market sales. Trade equipment is also assessed every year, using a formula based on original cost and age of the equipment.

If none of these items apply, the assessed value of a property can be increased by no more than 2% per year. Sale price of a property is considered be its’ market value unless the Assessor can prove convincingly that market value is not accurately reflected by the sale price. The Assessor is also expected to revise the sales price of a property to prove any value that can be attributable to items that are exchanged in a sale, not for cash; perhaps such as barter.

In many respects, Proposition 13 changed the rules in California – as explained by the County of Napa.org website, which tells us:

Prior to the passage of Proposition 13 in 1978, the Assessor reappraised all properties on a four-year cycle, with entire neighborhoods receiving increases in value based on recent sales in that area. Under Proposition 13, values are established at a base year, either as of March 1, 1975, or as of a change of ownership or new construction.

Proposition 13 requires an annual inflationary adjustment, not to exceed 2%. A property with a 1975 base-year value of $100,000 has a cumulative adjustment over the past 43 years of 211%, resulting in a current factored base year value of $211,000. Thus the function of the assessor has gone from doing mass appraisal impacting many properties to an individual appraisal of properties that have changed hands or had new construction.

Ownership records are maintained from documents obtained from the County Recorder. Assessor maps are updated as parcels are subdivided or their boundaries adjusted. Building permits are reviewed for accessible new construction and appraisers make discoveries in the field.

County Assessors Offices, Auditors, Auditor-Controllers, Clerks of the Board & Tax Collectors can found in all 58 counties across  the State of California: Here ~ on the BOE Website

Can an Irrevocable Trust Get A Loan?

Can An Irrevocable Trust Get A Loan

Can An Irrevocable Trust Get A Loan?

As many of us who have traversed the complex trail of real estate loans and long lines of credit know – there are certain non-traditional financing options, such as loans to irrevocable trusts and probate estates, that are generally denied by virtually all lenders – with the exception of certain licensed trust lenders… or more specifically, irrevocable trust lenders.

Conventional lending organizations such a credit union or your friendly local bank, will typically deny any loan request of this kind and will rarely approve a loan like this to an irrevocable trust – until the trust has been dissolved and the home title has been converted to the financial interest of a borrower, or individual.

California trust beneficiaries and trustees find out very quickly that funding for a trust is not the type of financing your standard bank or conventional lending firm will deal with. We find that most niche financing can be accomplished for high net worth individuals, or for individuals with an extremely high credit rating… Not so in this case.

Even if you have a fabulous credit score or credit report, most lending organizations will still not fund an irrevocable trust for you.  For example, when you buyout beneficiaries that are instigating family conflicts by insisting that the family sell off inherited property  and wind up selling their inherited property shares to one or more siblings looking to keep the property in the family – and keep a parent’s low property tax base… This will make the sellers happy to do so when they find out that by avoiding a realtor to sell their inherited parental home plus other hidden costs they end up with a lot more cash in their pocket having their sibling or siblings buy them out through a trust loan.

In fact, no matter how urgent or important our situation is, we discover very quickly that the only type of firm that will fund an irrevocable trust is a trust lender, with genuine expertise in property tax relief, and in the subtle measures contained in Proposition 19, and Prop 13. As long as a loan to an irrevocable trust is structured properly by your trust lender, you should be OK buying out sibling property shares while keeping your inherited home at a low Proposition 13 tax base – what property tax professionals refer to as “equalizing the distribution of a trust…”

So, in other words, the party or parties keeping the parent’s home and low property tax base, as well as the beneficiaries selling off their shares, soon realize they are entering into a win-win transaction, where everyone walks away in better shape than when they began!

And that is the unique upside and tremendous benefit that a good trust lender brings to the table… in particular the well known trust lender, Commercial Loan Corp irrevocable trust loan financing, which focuses on helping beneficiaries to keep a parent’s low property tax base, long-term, through the parent-to-child exclusion, and ability to avoid property tax reassessment, through Prop 13 and now Proposition 19, which still protects and breathes life into property tax relief in the state of California. Commercial Loan Corporation can be reached at 877-756-4454.  They have a flawless record for assisting clients avoid property tax reassessment on an inherited home and their testimonials can be viewed on Google with this link.

Noted property tax relief consultant Michael Wyatt addresses this in his usual articulate fashion:

These property tax benefits from Proposition 13 came about in California because people didn’t want property tax increases of 25% or 30%, or whatever. It really was out of control. And property tax rates were particularly high and unpredictable and unstable in California, for whatever reason, prior to 1978 when Prop 13 passed. So, as you know, property appreciates let’s say on average 20% per year. For the sake of argument, let’s say 20%. But property tax values are only going up by 3%…

People know intuitively that they can’t rely on the Assessors evaluation. Property value goes up 10% or more let’s say, as opposed to assessed value going up by 2%. That’s a significant difference. Was California really that bad before 1978, when Proposition 13 tax relief went into affect? Yes. California was raising taxes more than any other state, before 1978.

Most seniors – before Prop 13 – were reassessed at present-day rates. And many, many were forced out of their home. They simply could not afford the property tax hikes descending on them. Period. People, especially older people, were being impacted with higher property taxes year after year. And in many cases – with catastrophic results, obviously.” Michael Wyatt can be reached at (951) 264-6152.

While at the same time providing the beneficiaries selling off their inherited property shares with more cash than any outside buyer would want to offer them. A definite upside of working with a trust lender, in conjunction with Proposition 19. Obviously, beneficiaries in this sort of equation would have their own attorney or law firm looking over their shoulder, and advising them on the paperwork.

Trust and estate needs are varied and sometimes complex, but taking an experienced view toward the real estate component can offer superior results. One common situation occurs when one heir wants to keep the “old family home,” but the trust entity does not have enough cash or investments to “even the equities” among the beneficiaries. That same heir may want to eventually live in the home, or convert it to a rental property in the future and hold it as a  long-term investment. Either way it is a profitable return.  

Helpful Advisors During a Property Tax Transfer on an Inherited Home

California Property Tax Transfer

California Property Tax Transfer

Transferring A California Property Tax Base On An Inherited Home

If you’re a member of one of the many families who owns real property in California – it would be wise to understand how much Prop 13 and Proposition 19  can affect property tax reassessment, no matter where you live in the state. 

In fact, it’s never been more important than now to understand how profoundly these property tax relief measures can impact your life – plus how important it is to do everything correctly when dealing with property tax breaks like Proposition 19 and Proposition 13.

Number One Strategy: Avoid Making Mistakes!

For whatever reason, a fair amount of residents do not fully understand how these tax breaks work, and how to make them work.  The problem is, families often trigger reassessment of their property taxes by accident, due to a variety of reasons – refusing to hire an estate attorney simply to save money; faulty data; or mistakes filing information; missing document deadlines… so on and so forth.

Consequently, what can be lost can be significant… such as the ability to avoid property tax reassessment, to miss out on property tax breaks such as parent-child transfer and the parent-to-child exclusion; the right to transfer parents property taxes, to keep parents property taxes after a CA property tax transfer, when inheriting property taxes.

It’s not difficult to mishandle a transfer of property when inheriting a home, or mishandle the drafting of a trust in such a way that expectations towards a cap on property taxes are disappointed. Of course, these types of errors and subsequent property tax  reassessment brings great happiness to the parties responsible for collecting property taxes all over California.

Families that are concerned with making sure these processes go smoothly generally enlist advice and/or the services of a real estate law firm or estate attorney such as Rachelle Lee-Warner, Esq. at Cunningham Legal, or a property tax consultant like Michael Wyatt Consulting, or perhaps a Trust Lender such as Commercial Loan Corp.

Proposition 19 and Revisions to California Property Tax Relief

It is difficult to avoid the fact that property tax breaks in California have been impacted, one way or the other, by Proposition 19; which was voted into law Nov 2020, becoming active on Feb. 16, 2021.

Under Proposition 19, a parent can transfer their primary residence and low property tax base to their children (i.e., heirs) — allowing  offspring to move into an inherited home rather quickly, within 12-months, as a principle residence.  Although, if the home is valued at more than $1,000,000 it may be reassessed, with an impact on the parent-to-child exclusion from current tax rates.  On the other hand, if you’re over 55, physically impaired, or a victim in some way of the frequent wildfires California has been experiencing, or some other natural disaster such as a flood or earthquake — you can be a recipient of numerous property tax breaks on top of CA property tax transfer (discussed in detail elsewhere within this Blog).

However, beneficiaries of parental property have other options, such as working with a trust lender such as Commercial Loan Corp, for example, in addition to having expertise in CA property tax transfer,  the ability to provide funding to an irrevocable trust, in order to buyout co-beneficiaries looking to sell off their inherited property shares, as well as establishing a permanently low property tax base. If you think you may benefit from a Proposition 19 property tax transfer on an inherited home, you can reach Commercial Loan Corporation at 877-464-1066 for a free benefit analysis.

What is Involved Transferring CA Property Taxes from a Parent to an Heir?

Thad Farrell - Proposition 19 Property Tax Specialist

Thad Farrell – Proposition 19 Property Tax Specialist

Mr. Thaddeus Farrell is an Account Manager at Commercial Loan Corporation at Newport Beach, California.  He arrives from a long, successful  career in  mortgage sales, and is considered a rising star in Trust & Estate Lending.  We were fortunate to have Mr. Farrell agree to share his views on property tax relief, Proposition 19, and irrevocable trust loans for new homeowners and beneficiaries in California…
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Property Tax News:  As an account manager with Commercial Loan Corp who do you generally communicate with, on a daily basis?

Thaddeus Farrell:  I usually talk to attorneys, licensed fiduciaries, trust or estate administrators, Conservators, trustees, beneficiaries and executors.  Mostly attorneys however, regarding their clients’ need for lower property taxes. Frequently, I follow up with attorneys… getting them on the same page.  Part of my job is to help them help their clients.  In terms of driving interest from lawyers or CPAs I may be talking to.  It’s case by case, and timing, as to what an existing client is in need of at this or that very moment.

Property Tax News:  In your opinion sir – what is the most  important  way Proposition 19 helps families inheriting property in California?

Thaddeus Farrell:  Overall, to assist families with their property taxes, transferring property taxes through Proposition 19 as well as helping with buying out co-beneficiaries’ inherited property shares.

Property Tax News:  What is it precisely that these California families are trying to accomplish?

Thaddeus Farrell:  Simply put, to transfer their parents’ low property tax base.  Look at it this way – property reassessment can cripple a family financially.  I look at it like this – expenses are a part of life, and when you inherit a family home, if the property is reassessed at current rates, those expenses will usually go sky high.  Most middle class people can’t afford to pay that type of tax hike.  They want to take advantage of Proposition 19 and a trust loan, transferring CA Property Taxes from a Parent to an Heir tax break, to avoid property tax reassessment, and move into an inherited home within a year as a principle residence, which was their parents’ principle residence formerly protected by Proposition 58 and Prop 13. 

Property Tax News:  How does Commercial Loan Corp fit in, put very simply?

Thaddeus Farrell:  We guide beneficiaries  through a process that will maintain their parents’ low property tax base.  Usually siblings that want to retain inherited property from parents  come  to us first, generally after being referred to us by a law firm.  Middle class families that can’t  afford to pay reassessed taxes on an inherited home… Which pretty much sums up most families these days!

Property Tax News:  What do you discuss with these attorneys that you speak to  about Proposition 19 and a trust loan saving their clients money on property taxes?

Thaddeus Farrell:  I make it very clear right away with attorneys that siblings inheriting a home have two options.  They can sell or keep their inherited property.  In other words, your family has to make up their mind – what they want to do, sell or keep. Selling it is far more expensive. By keeping the home, each beneficiary receives approximately $15,000 extra in a cash trust distribution when compared to selling the home because they avoid costly realtor and real estate sale expenses. The child beneficiary keeping the inherited home winds up saving on average $6,200 in yearly property taxes.  

Property Tax News: Is it really true that residents save that much?

Thaddeus Farrell:  Absolutely!  A realtor typically charges 6%, there can be costs to prepare the home for sale and closing costs such as title, escrow or assistance with buyer closing costs on top of that… So do the math there, for starters. If the property is reassessed – the cost can be very high.   

Property Tax News:  And we understand you treat everyone the same, regardless of their property’s value, or their net worth.

Thaddeus Farrell: That is correct.  We extend the same commitment to everyone.  I for one treat each customer like I would treat my brother or my sister.  We have never had one unhappy customer in the last three hundred  transactions I’m aware of. Five star reviews, five-star Google ratings, no complaints!  

Property Tax News:  Thaddeus, if someone needs assistance with California Proposition 19, a bridge loan to make an equal distribution to an estate or a trust loan to an irrevocable trust, how can they contact you?

Thaddeus Farrell:  They can contact us at (877) 756-4454; we are always happy to help.

Property Tax News:  Great.  Well, thanks for talking with us today.

Thaddeus Farrell:  My pleasure.  Glad to do it. 

If you have questions regarding your options upon inheriting a home from parents – transferring their low property tax base to your new principle residence – contact Michael Wyatt  Consulting or the Commercial Loan Corp at (877) 756-4454 to speak with a Trust Fund Loan Manager or Property Tax Savings specialist. 

Part Two: Your Source for Timely, Accurate News and Info on Trusts & Estates, for California Proposition 13 & Proposition 58

Proposition 58 Property Tax Transfer

Proposition 58 Property Tax Transfer

Let’s take a quick look at the actual state tax data in the great state of California…  Overall revenue going to local government entities from property taxes throughout California was nearly $5.0 billion in 1978 to 1979… and by 2010 to 2011 real estate tax revenue was at $49 billion per year! An increase that is two and a half times the rate of inflation over the same period, furnishing California local government entities with a very robust stream of real property tax revenue.

On the human side, away from the economics of the issue, folks in California, prior to Proposition 13, before 1978, were seeing elderly neighbors, friends and senior relatives, inheriting property taxes in CA… being forced from their homes as egregious real property tax increases spiraled out of control — and in some areas literally doubled from one year to the next — as older friends and beloved elderly relatives living right next door on fixed incomes, could not meet these unfair tax increases and were cruelly pushed out of homes they had been living in, and raised families in, for over 40 years. neighbors were being forced from their homes.

After Proposition 13 was voted into law, Californians saw right away the benefits of a tax system that would limit annual tax increases to 1% to 2% max, and began to provided a stable system for everyone in California – from government agencies that depend on property taxes, to people like seniors and other various middle class home owners… turning what had become a dreaded system of out of control real property taxes – into a fair, predictable tax system year to year – no longer a financial nightmare for those who happened not to be wealthy, living on modest or fixed incomes.

And of course in 1986 Proposition 58 was passed in California, making Proposition 13 all the more critical and invaluable…  smoothing out property transfer from parent to child into a formal transaction; middle class people  inheriting property taxes in CA now had the ability to avoid property tax reassessment at present-day rates, with the right to keep parents property taxes intact. Naturally, this was a major advancement for Californians, in terms of tax relief.  Not only for residential and commercial property owners – but for renters all across the state as well, since rents remained reasonable as long as landlords were not besieged by increased property taxes.

Nonetheless, those opposing this most popular tax solution called Prop 13 by Californians, still continue dragging the same old tired arguments through the gutters and broken down political avenues used by real estate executives, politicians and newspaper editors to put forth their old, discredited arguments in Op-Eds and widely debunked opinions in Editorials, in the few newspapers that will allow them the space to air out their opinions — despite the fact that everyone knows most Californians favor Proposition 13 & 58.  The critics are tone deaf.

We present these issues objectively in this go-to free resource blog for people interested in Proposition 13 and Proposition 58 property transfers…. For those keenly interested in learning more about how to avoid property tax reassessment, and how to keep parents’ 1% to 2% property tax limits safely in place in California, out of the reach of irrational opponents…

For those of us who want to know more about parent to child transfer and parent to child exclusion; about trust distribution loans, avoiding property tax reassessment, proposition 13 transfer, how to keep parents property taxes… and how to effectively transfer parents property taxes. And for property owners who wish to educate themselves further on the subject of inheriting property taxes, property tax transfer, real property tax transfer or real estate tax transfer.

If these interests, and additionally related topics, describe you – then you’re in the right place. We welcome your opinions and comments, and we’ll add your text comments or audio/video commentary, if you have something new, valuable, or unique to add to the discourse here.

PART TWO: California Proposition 58 and Loans to Trusts ~ Featuring Noted Trust Loan Expert Tanis Alonso from Commercial Loan Corp.

Loans to Irrevocable Trusts for Proposition 58

California Loans to Irrevocable Trusts for Proposition 58 Property Tax Transfers

Our Interview with noted Commercial Loan Corp. Trust Loan and Proposition 58 specialist Tanis Alonso continues…

Property Tax Transfer:  Tanis, let me ask you…  Beneficiaries that call your company, desperate to keep parents property taxes;  for any solution to their property transfer / Proposition 58 issue – is it a safe bet to assume that 99% of the time there are elements that come up again and again?

Tanis Alonso (Commercial Loan Corporation): Well, that’s true, to a point. With beneficiaries that call us, with a trust or estate situation, there is always real property being inherited, going to one or several beneficiaries… and little, if any, cash – and each family always has different dynamics. There are always differences, as regards the people and details involved. But, the one constant you can be sure of is that there is always someone who wants to sell… and always someone who wants to keep the property they are inheriting… dead set against selling.

Property Tax Transfer: And at the end of the tunnel, is it safe to assume that with your company it’s generally a win-win equation, for everyone involved. Everyone involved, more or less, get what they want, right?

Tanis Alonso (Commercial Loan Corporation): That’s right.  99% of the time. The beneficiary, or beneficiaries, that want cash from the sale of the property that they’re inheriting, get the cash they were looking for, from the trust loan…

Property Tax Transfer: And the beneficiary or beneficiaries that want to keep the house, get to keep that house, and keep parents property taxes…

Tanis Alonso (Commercial Loan Corporation): Yes! And let me say that, typically, this is a really, really big win for them – as the siblings that wanted to sell are usually very vocal, and very aggressive about their desire to do so! That beneficiary that wants to keep that property, that is also able to get the other siblings a large amount of cash for their shares in the inherited real estate – while still being able to keep the home they’re so attached to, and keep parents property taxes; keeping parents property tax rate.  This would be practically impossible, were it not for our trust loan. And there’s your win-win equation!

Property Tax Transfer: And what about the cost factor? Costs involved in the equation… How does everyone benefit on that level, getting cash to the beneficiaries that wanted cash from a house sale? Versus coming up with property buyout cash themselves…
       
Tanis Alonso (Commercial Loan Corporation): OK, so cost involved, selling versus keeping inherited property. I’ll try to keep the equation simple. Costs associated with this property funding process through a trust loan, paying for everything, including beneficiary property shares buyout, taxes, etc. is, on average, 3.5% – So by someone keeping the family property everyone will receive more money than if they were to sell the property at approximately 6.5% in costs. The average trust receives $45,716 more to distribute than if they were to sell the property to some random buyer.  Each beneficiary on average is receiving $16,652 more by someone keeping the property, instead of selling it. And our average annual tax savings is $6,043. We have already saved a combined amount just shy of 1 million dollars for our clients on property taxes. That is a significant benefit for all beneficiaries when someone keeps the property instead of selling it! 

PropertyTax Transfer: So you’re saying those savings would have been completely lost, per beneficiary, if they had sold out to a regular buyer…

Tanis Alonso (Commercial Loan Corporation): That’s right. For example, say it’s you and your sister.  A major conflict. You want to keep the house you’re all inheriting from your parents, plus keep parents property taxes. Why should I let my sister sell? The solution there is because you are going to get more cash in your hands than if you were to sell the property! That’s the bottom line. A trust loan transaction takes 7-10 business days whereas selling will take a few months. Everyone receives more money, more rapidly, then if they were to sell the property on the open market. Everyone benefits from this… it’s win-win all the way around.

PropertyTaxTransfer: So you let your sister sell, so everyone wins – is what you’re saying.

Tanis Alonso: Of course! Let her sell, let her get her way – and you end up getting your way… you get what you wanted, to keep your house with everyone paid off and happy. No more conflict. On a $500,000 property – do you want to spend 6.5% to sell that property, with a realtor, or 3.5% through our trust loan, in keeping with the Proposition 58 tax system? Which number would you want to give away, 6.5% or 3.5%? 

Property Tax Transfer: Naturally. So the long range picture looks like increases in taxes as well, so that’s not as affordable either.

Tanis Alonso (Commercial Loan Corporation): Absolutely right. In certain cases a property tax reassessment can add an extra $700 to $1000 per month to your property taxes. That’s an extra $1,000 per month – not per year! Month after month. That is affordability vs not affordability to many. 

Property Tax Transfer: Going through the Proposition 58 tax system, with the trust loan paying everyone off…  What would property taxes look like going down that road?

Tanis Alonso (Commercial Loan Corporation): OK so the question is, “why do I need a trust loan to buy out beneficiaries who want to sell our inherited house?”  The answer is you can still keep the house you’re inheriting, and not spend any of your own money in the process.  The importance of the trust loan is that you can buy out your siblings and still keep parents property taxes. You keep 100% of the low Proposition 13 property tax base that was originally paid by your parents.  If you were to use your own money to buy out your siblings, the State Board of Equalization would see that as a sibling buying out a sibling – and that would definitely trigger a property tax reassessment. Naturally, the result of that would be higher taxes.  So you need the trust loan to buy out your siblings in order to take advantage of Proposition 58, and keep the low property tax base. 

Property Tax Transfer: Most people don’t have that kind of cash on hand nor do they want to use all of their cash for this just to buy out beneficiaries in an estate setting. Especially if the numbers go higher…

Tanis Alonso (Commercial Loan Corporation):  Beneficiaries who want to keep their inherited property still put a lot more money in their pocket, still save a lot more,  by not using their own funds…  by buying out beneficiaries that want to sell by going the trust loan route.  Staying within the discounted Proposition 13 tax base, being able to keep parents property taxes … taking advantage of the  Proposition 58 property tax system, or tax shelter.  Using this tax shelter  that we looked at before, if you recall – would be around $1,200 per year on a million dollar property.  Saving thousands of dollars annually on property taxes by taking advantage of Proposition 58; keeping their parents low property tax base. 

Property Tax Transfer: Yes, the difference in the numbers are stunning.

Tanis Alonso (Commercial Loan Corporation):  Yes it is.  So if you use your own money to buy out your siblings you will trigger a reassessment… if that was reassessed normally, without doing the property transfer and beneficiary payoff with our trust loan – you’d be looking at an $11,000 tax hit per year on the same million dollar property!  If reassessed at the current, present day, base rate – that tax hit goes up 10 times. A significant difference in cash back in your pocket after it’s all done and said. Trust loans are a huge benefit for all of these families and that’s how we’re able to really help people in a significant way.  

Property Tax Transfer: The amount of money saved really is remarkable.  And I can see that you genuinely enjoy helping your clients save a great deal of money with these trust loans. Making great use of the low Proposition 13 base rate, and the Proposition 58 property transfer tax shelter… The formula works!

Tanis Alonso: Absolutely. And helping people in this way is what it’s all about! That entire viewpoint is the basis for this whole company, from the top down – starting with the CEO, who is a truly terrific guy, who genuinely loves helping people, with money, memories, and time. And you can’t replace memories and time!

Property Tax Transfer:  You can’t replace memories and time… Very well put!  That is a concept to remember.

Tanis Alonso: It is so important to remember, when you truly care about what happens to the people you’re helping.

Property Tax Transfer: Very true.  Your clients are lucky to have you folks working for them.  Thanks so much for speaking with us today.

Tanis Alonso: Thank you.  It was a great pleasure chatting with you.

PART ONE: California Proposition 58 and Loans to Trusts – Featuring Noted Trust Loan Expert Tanis Alonso from Commercial Loan Corp.

Loans to Trusts for Proposition 58

Loans to Trusts for Proposition 58

We sat in with noted Proposition 58, trust loan expert – Tanis Alonso, at Commercial Loan Corporation in Southern California.  Tanis has a uniquely profound, global understanding of the entire trust loan process; and applies a very human, not simply financial, viewpoint to the process ~ as does the entire team at the cloanc.com organization; with a strong, genuine focus on “helping people” not simply implementing financial transactions…

Property Tax Transfer: Thank you so much for agreeing to chat with us about Proposition 58 and trust loans today…

Tanis Alonso: Of course. It’s my pleasure.

Property Tax Transfer: Great. Tanis, can we take a close look at how the basic trust loan process works in California, from your perspective, as a lender – and from the point of view of your average everyday beneficiary, many who need to keep parents property taxes…  Some who want to sell a property they are inheriting from their parents – and of course the other beneficiaries to a trust or estate that are determined to keep that home, and fight that sale. But first, who is your typical caller? Who in the estate or trust scenario tends to reach out to you first?

Tanis Alonso: Basically, whomever is trying to not sell the inherited property – is generally the initial caller to my office. It might be the trustee, frequently at odds with certain beneficiaries… Or very often it’s a family member, one of the beneficiary’s to the trust that doesn’t want to sell that home.

Property Tax Transfer: Got it. So, what does an average Proposition 58 property transfer and trust loan scenario in California look like, contributing to peace of mind for property owners? There must be similar scenarios, that reflect average  trust or estate outcomes all across the state.

Tanis Alonso: Absolutely. One of the most common scenarios we see, here at Commercial Loan Corp., are elderly parents, for example… who, sadly, pass away, leaving loved ones behind. So, let’s say there is an estate, or perhaps a trust, and there are three beneficiaries involved… And property is the only asset… Let’s say there are no cash accounts. And this is not uncommon these days.

Property Tax Transfer: Yes, we hear that it’s quite common to see a trust inheritance, or probate estate, where there is very little cash left at the end of the road…

Tanis Alonso: Exactly. Parents who pass away in their nineties let’s say, who basically have spent most of their cash assets that were in savings, or in stocks and bonds, and by the time they get into their mid or late nineties, those assets are mostly gone, cashed out or spent –

Property Tax Transfer: You mean, simply spent on living… no frills, no traveling around the world, staying in fancy hotels, eating out in 5-star restaurants…

Tanis Alonso: Oh no, nothing fancy… just simple day to day living. Food, rent, medical expenses – normal expenses that eat up plenty of cash.

Property Tax Transfer: Certainly. Medical expenses can eat up an entire estate… and leave a house, and that’s all that is left in so many trusts, in so many estates, left by decedents. At least it’s usually paid for.

Tanis Alonso: Yes, many older homes being inherited by beneficiaries in these scenarios are not carrying any debt. Which is fortunate. So let’s say in many of these middle class or even upper middle class families there is a house, maybe some land, and possibly a few valuables…

Property Tax Transfer: OK. So there isn’t much money left in many inheritances… So what do beneficiaries do? When do these conflicts we hear so much about begin, when a house is being inherited by several beneficiaries… some who wish to sell, and some who prefer to keep the property, and to keep parents property taxes?

Tanis Alonso: Well, here is a typical middle class inherited real estate scenario – let’s say, for example, there are three beneficiaries and no other assets being inherited except an older home. One beneficiary wants to keep the house, to keep parents property taxes; while the other two siblings prefer to get cash from an immediate house sale, probably through a nearby realtor. But – instead of selling to a buyer, here is where Proposition 58 and a trust loan comes into play, providing liquidity and compliance with the Proposition 58 tax system – furnishing the two siblings who prefer to sell, with enough cash liquidity as if they had sold their shares in the inherited property to a buyer…

Property Tax Transfer: So why not sell? Why the trust loan?

Tanis Alonso: Because with a loan to a trust there is the upside of less expense. Frequently, we’re talking about ten times less of an expense than would normally be involved in a house sale. Again, a process compensating beneficiaries through a trust loan, instead of a house sale or coming up with the cash yourself… versus a formal house sale through a realtor that would cost approximately ten times the amount to process the entire scenario, a house sale, with realtor commission and fees, taxes, ancillary costs, etc…

Property Tax Transfer: Paying off the beneficiaries who wanted the cash from a house sale in the first place, right?

Tanis Alonso: Exactly. And so the rest of the trust loan goes to pay for 100% of parents Proposition 13 tax base – and the Proposition 58 tax system makes it possible to transfer the property to the beneficiary or beneficiaries that did not want to sell – to keep parents property taxes at the low Proposition 13 tax rate – or involving Proposition 193 if it is real property,  not left by the parents, but by grandparents.  

Property Tax Transfer: You say ten times less on expenses versus paying for it yourself?

Tanis Alonso: Absolutely. It costs the families we help far less to get a trust loan from us, believe it or not, then it does if they were to dig into their own savings to complete the Proposition 58 property transfer process.

Property Tax Transfer: How does that translate in terms of real numbers?

Tanis Alonso:  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. 

Property Tax Transfer: It sounds counter intuitive, doesn’t it.

Tanis Alonso: I know, it does sound counter intuitive – yet it’s true. All you have to do is run the numbers yourself, and you’ll see what I’m talking about. It’s a better way to be able to keep an inherited house in the family, and to keep parents property taxes, when there is a dispute going on that pits the beneficiary who wants to keep a house against the beneficiaries that want to sell that home. A home that a family has so many memories associated with; with such strong emotional attachments to. There are so many wonderful family memories that are attached to each home. And every home is unique and different in that sense, just as every family member is different and unique.

Property Tax Transfer: You mean emotional memories you can’t replace with cash, in fact you can’t buy for any amount of money.

Tanis Alonso: That’s right. Anyway, this process allows families to keep that home in the family. And that’s the most important point!

Property Tax Transfer: It is the crucial point.

Tanis Alonso: Absolutely. And as a person on the front lines for this firm, neither I or Commercial Loan Corp. 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 property”. To us, this a “piece of family history” in the making. And the process a family decision, not a “transaction”. We see our clients as real families that we’re helping, financially and emotionally, not just as clients signing a contract for a trust loan. For us it’s much more than that.

Property Tax Transfer: It’s very obvious that you really enjoy helping people… getting them money when they really need it – and saving them on the cost side in the bargain, with trust loans.

Tanis Alonso: Correct. We see them as real people that we’re able to help in a time of need. For us it’s so much more than cash and property – we don’t view it that way. We’re talking about family history here. Not just “another deal”.

Continued in Part Two…

Your Source for Timely, Accurate News and Information on Trusts & Estates, for California Proposition 13 and Prop 58

Proposition 58 Property Tax Transfer

Proposition 58 Property Tax Transfer

Most Californians favor Proposition 13 & 58. And it’s worth pointing out that California Proposition 13, also called The People’s Initiative to Limit Property Taxation, voted into law as an amendment of the Constitution of California – is, after 42 years, even more popular today as it was when Californians voted it into law on June 6, 1978. (Interestingly enough, the same date memorializing the Normandy landings, D-Day on June 6, back in 1944.)

As a matter of fact, CA Proposition 13 was championed early on, and driven successfully through numerous political  obstacles, by the famous Howard Jarvis Taxpayers Association… whose  courageous and inspired CEO, Mr. Jon Coupal, took over the Chief Executive reigns in 1999, and is largely responsible for leading the charge for accelerated property tax relief in California… right up to the present.

With financial analysts now telling us that Proposition 13 has saved California taxpayers over $528 billion saving the average middle class California family more than $60,000 to-date… and counting – it’s no wonder at all that most Californians favor Proposition 13 & 58!  In fact, as Mr. Coupal and his Taxpayers Association tells us, Prop 13 has made everyone’s property tax in California more reasonable.  Click here to learn more more…

Yet even though a majority of home owners in California still support Proposition 13, and Proposition 58 – which has, since 1986, enabled home owners to transfer real property from parent to child, and vice versa, without beneficiaries being reassessed for present day tax rate increases, discussed here, in various posts, within this blog. Or, click here for more info and Q & A on Proposition 58 (and 193)… there is still a stubborn minority that opposes it… such as special interest politicos in the pocket of certain powerful people in the real estate business or public employee union bosses, some independent realtors, several ill-informed academics, and a few mainstream newspapers like the SF Chronicle and LA Times with an interest in big-bucks real estate advertising.

Generally, the opponents of Proposition 13, and Proposition 58 home transfers avoiding property tax reassessment… typically are after more cash from tax payers in California, especially some folks in the real estate business, and are still laboring under the long-held, dragged through the mud misconception that there would be more cash coming into the real estate business, and into state coffers, were it not for the lack of present-day real property value reassessment associated with Proposition 13 and Prop 58… directly affecting California tax revenue. Even though accurate data shows us that the California state government benefits from Proposition 13 just as much as tax-paying homeowners do from the lack of tax reassessment, allowing them to never pay more than a 2% increase in property taxes.

Let’s take a quick look at the actual state tax data. Overall revenue going to local government entities from property taxes throughout California was nearly $5.0 billion in 1978 to 1979… and by 2010 to 2011 real estate tax revenue was at $49 billion per year! An increase that is two and a half times the rate of inflation over the same period, furnishing California local government entities with a very robust stream of real property tax revenue.

On the human side, away from the economics of the issue, folks in California, prior to Proposition 13, before 1978, were seeing elderly neighbors, friends and senior relatives, being forced from their homes as egregious real property tax increases spiraled out of control — and in some areas literally doubled from one year to the next — as older friends and beloved elderly relatives living right next door on fixed incomes, could not meet these unfair tax increases and were cruelly pushed out of homes they had been living in, and raised families in, for over 40 years. neighbors were being forced from their homes.

After Proposition 13 was voted into law, Californians saw right away the benefits of a tax system that would limit annual tax increases to 1% to 2% max, and began to provided a stable system for everyone in California – from government agencies that depend on property taxes, to people like seniors and other various middle class home owners… turning what had become a dreaded system of out of control real property taxes – into a fair, predictable tax system year to year – no longer a financial nightmare for those who happened not to be wealthy, living on modest or fixed incomes.

Nonetheless, those opposing this most popular tax solution called Prop 13 by Californians, still continue dragging the same old tired arguments through the gutters and broken down political avenues used by real estate executives, politicians and newspaper editors to put forth their old, discredited arguments in Op-Eds and widely debunked opinions in Editorials, in the few newspapers that will allow them the space to air out their opinions — despite the fact that everyone knows most Californians favor Proposition 13 & 58.  The critics are tone deaf.

We present these issues objectively in this go-to free resource blog for people interested in Proposition 13 and Proposition 58 property transfers…. For those keenly interested in learning more about how to avoid property tax reassessment, and how to keep parents’ 1% to 2% property tax limits safely in place in California, out of the reach of irrational opponents… For those of us who want to know more about parent to child transfer and parent to child exclusion; about trust distribution loans, avoiding property tax reassessment, proposition 13 transfer, and how to keep parents property taxes and how to effectively transfer parents property taxes. And for those home owners who wish to educate themselves further on the subject of inheriting property taxes, property tax transfer, real property tax transfer or real estate tax transfer.

If these interests, and additionally related topics, describe you – then you’re in the right place. We welcome your opinions and comments, and we’ll add your text comments or audio/video commentary, if you have something new, valuable, or unique to add to the discourse here.

Part One: Why is Proposition 13 so Attractive to so Many Californians?

In examining and analyzing tax relief from Proposition 13 property tax transfer, as well as the financial and political drama surrounding the initiative – with all the on-going conflict between detractors and supporters; between critics and advocates – it is important to note that prior to Proposition 13 in California, from one end of the state to the other, property taxes were pretty much out of control, and tended to increase arbitrarily, whenever it was deemed appropriate to do so, for the benefit of one local city or town government or another.

Anytime local townships and city governments needed extra money to fund this or that, they felt free to increase property taxes, and take large amounts out of “redevelopment agencies”, or RDA – particularly when it involved commercial land development, questionable funding for certain school programs, and possibly tax rebates for certain business verticals aligned politically with local government. Frequently spearheaded by special interests.

Specifically, property tax revenues were, and still are, distributed to K-12 schools and community colleges; various counties, cities & “special districts”, generally with redevelopment agencies at the bottom of the list.

The irony was that redevelopment agencies that were the most critical for local residents received the least amount of money from property tax revenues… And this trend still continues, to this day. We’re talking about redevelopment agencies that purchase property for local government; that raze and build non-residential structures; that provide municipal infrastructure like bridges, city or town streets, rural roads, and lighting, for public safety; that develop affordable housing (at the very bottom of their list) as well as renovating local commercial areas.

Before Proposition 13 property tax transfer tax relief was in effect it was particularly obvious how paltry funding was from property taxes that were supposedly going, in equal parts, to support local infrastructure needs – generally to help middle and lower middle income residents with public safety, health and welfare.

Finally, years later, the excellent organization PPIC.org provides in a recent study – four recommendations to local California law-makers that should help resolve the controversy surrounding redevelopment agencies:

a) The legislature should formally clarify the goals of re-development.
b) The definition of blight should be aligned with the goals of redevelopment and should be made more precise.
c) Some form of oversight authority should be established to monitor RDA behavior.
d) If the legislature intends redevelopment to be self-financing rather than heavily subsidized, the pass-through rate should be increased significantly.

At any rate, these issues obviously continued to breed resentment prior to 1978, from residential property and small business owners… and eventually that collective resentment morphed into a rush of significant public support for a solution – and that solution turned out to be Proposition 13, promoted and driven forward mainly by Howard Jarvis’ Taxpayers Association.

California Proposition 58: Combating false claims that Prop 58 causes home sale shortages – benefiting wealthy homeowners

After 24 years, CA Proposition 58 still makes it possible for new property owners to avoid property tax increases when inheriting property from their parents. Or vice versa. And of course, as we just indicted, new homeowner’s pay taxes that are based on established Proposition 13 factored “base year value”, and not on updated, reassessed market value at the time real property is inherited. Just as you may have inherited your parent’s home when they passed away.

Many middle class homeowners in California are receiving incredible value from CA Proposition 58, transferring real property to adult children without tax reassessment throwing them into a financial crunch. And this is particularly meaningful to people in older age ranges, where income is generally stagnant, or at least fixed; and net worth tends to decrease noticeably. Anything like severe tax hikes, or any unexpected fees or debts for that matter, are particularly unwelcome by older middle class Americans.

Moreover, to maintain CA Proposition 58 tax relief for real property that has been transferred to them by parents or other relatives – heirs or beneficiaries will often convert property and/or land to other uses, such as turning a property into a rental, or a vacation home, or they might lease out transferred land for farmland, or other commercial uses. Click here for more information on California Property tax by county…

Occasionally, this creates conflict with other family members who would simply prefer to sell off all their property shares right away for fast cash. However, if they can be convinced, with respect to the benefits associated with holding on to transferred property, and making good use of the Proposition 58 tax break – those heirs or beneficiaries can usually be turned around.

Now, interestingly enough, there are a number of people in California who believe that Prop 58 tax relief is “likely” (that is to say, “probably”) contributing to “a critical” decrease in homes for sale in California – driving an outcome that is supposedly negative for regular folks in California who are looking for a home to purchase – and somehow benefiting the very wealthy; encouraging them to hold on to their properties for ever and ever, and never sell.

According to a small but very vocal number of people in the media who are disseminating this point of view, both home seekers and realtors are soon going to be in “desperate need” in the near future to locate homes for sale… and this somehow is, even now, throwing the normal demographic eco-system into total disarray. While somehow mega-benefiting the ultra rich.

This segment of urgent home-seekers is supposedly being victimized by a critical lack of somewhere between 60,000 and 80,000 homes that are now not in the market, for sale. According to these folks, this phenomena, caused by Proposition 58, is turning the normal state of affairs literally upside down due to the passing of homes between parents and children every year – without standard property value reassessment occurring, to determine “true” property value and the subsequent tax hit. That’s roughly 10% of all property transfers in California.

We encounter this argument consistently, generally from the same media and political sources – yet never with any specific statistics to back up these claims, as far as knowing with some degree of assurance that this issue, although a somewhat manufactured issue, is affecting a considerable number of inherited, sold or gifted properties in California every year…

Yet these dramatic claims, always projecting outcomes in the “near future” are always devoid of any facts or data that actually verifies that 60,000 to 80,000 plus home transfers every year are supposedly throwing the natural order of California real estate into total disarray.

In fact, the people making the argument that CA Proposition 58 is in fact the driving force behind this alarming, shrinking number of homes available for sale in California – causing doom and gloom to descend on California home seekers in 2020 and in years to come. In fact, this point of view goes so far as to suggest that all the thousands of empty handed home seekers on the West Coast are soon to be bereft and practically homeless!

However. No one taking this stand has actually presented, or even attempted to present, any factual data that proves Proposition 58 is actually causing this “shrinking inventory” of houses for sale in California. Articles in newspapers such as the LA Times or the San Francisco Chronicle only print quotes from nervous realtors, or academics merely projecting a personal opinion… based on sketchy anecdotal evidence at best; yet never presenting any convincing data to back these claims up.

Secondly, it is important to note that the same parties cultivating and advancing all of these claims also freely admit that Proposition 58 does, without question, protect the adult children of parents transferring property to them, from steep tax increases on inherited property. Just as Proposition 13 does, in fact, protect homeowners from egregious property tax increases year in, year out.

Thirdly, and this is where the bottom line issue emerges – this “whisper campaign” is quite possibly driven by anxiety and panic experienced by seasoned realtors and brokers that are looking to preserve their golden market, which may be experiencing modest shrinkage right now. A market that is not decreasing based on a few thousand home transfers, but that is experiencing modest shrinkage due mainly to the fact that (regardless of what Cable & Network TV News repeatedly tells us) – the job based economy in the US is not in fact booming, as they would have us believe…

Our job based economy is in itself decreasing slightly, in manufacturing, in electronics and computer sales, in auto sales, and within various other formerly active verticals where white collar and high tech jobs are tightening, not expanding. So therefore fewer white collar folks with disposable income are putting their old home on the market and immediately purchasing a 7-figure home the first chance they get; and instead may simply stay where they are, or possibly even down-size, which many middle class and even upper middle class seniors in their early to late 60s are doing these days, and have been for some time.

So instead of blaming Proposition 58 for the fact that homeowners in California are holding onto their old home for a longer period of time rather than putting their house on the market after 9 or 10 years – folks in the media advancing these theories perhaps should take a closer look at the fact the white collar and upper middle class folks who typically drive or spike the California real estate market, are these days waiting a lot longer in order to feel comfortable enough to put their modest home on the market, and actually plunk down a $75,000 or $100,000 cash down-payment towards a new home purchase in a very nice area, where realtors are struggling to sell $800,000, $1.5M or $2M properties in upscale neighborhoods.

As someone once said, “It’s the economy stupid!” It’s the overall job based economy, not Proposition 58, causing a slow-down, or soon to cause any decrease, in real estate sales throughout the state of California.