How Secure is Property Tax Relief for Californians?

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 19Commercial 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.

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

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.”

What to Look For in an Estate & Trust Lender

Trust Loans in California

How to get a trust loan in California

Retaining a Low Property Tax Base in California

Establishing and locking in a low property tax base helps you as a new homeowner, or beneficiary inheriting parental property, to minimize your property tax burden over the long-term. As most Californians know, to save on taxes it’s essential to utilize existing property tax relief tools to reduce taxes on inherited real estate… Tools that support property tax transfer and property tax breaks;, the ability to  transfer parents property taxes and keep parents property taxes as long as an inherited home remains a primary residence; inheriting property taxes.

Most residents believe expert help is essential, from a property tax consultant, a tax attorney, or a trust lender; and feel it would make very little sense to ignore this.  

What we should find in an experienced California trust lender, along with providing a loan to an irrevocable trust, is expertise guiding new homeowners, or beneficiaries inheriting a home, through the inheritance process – able to establish the low property tax base still possible under Proposition 13 – in conjunction with Proposition 19…

Proposition 19 is still clinging to the frayed edges of Proposition 58, as homeowners and renters alike show signs of buyers remorse, all across California, having voted for Proposition 19, thinking that their ability to avoid a property tax reassessment was the key ingredient… amidst confusion over the fine print concerning property tax transfers – hidden behind sentimental window dressing claiming to be tax revenue going mainly to firefighters, the elderly, and folks hindered by wildfires or other natural disasters and disabilities.

Californians are sentimental Westerners by nature, and what Westerners could possibly vote against the elderly and homeowners with severe disabilities!

At any rate, a loan to an irrevocable trust from a trust lender, working in concert with Proposition 19, in conjunction with a parent to child property tax transfer — better known as a parent-child transfer and parent-to-child exclusion, allows heirs and  beneficiaries to avoid a property tax reassessment – while also being able to buyout inherited property shares from siblings, for more cash than an outside buyer would offer.

Essential Trust Lender Tasks

Meanwhile, California real estate taxes are maintained at a reasonable level by Proposition 13, which limits real estate tax increases to 2% maximum per year. Proposition 58, Proposition 193, and Proposition 19 allow for this low tax basis to continue if real property is transferred to heirs from a parent or grandparent.

At any rate, a good trust lender should be able to complete the following tasks flawlessly and without issue:

1. Deciding which beneficiary will own the inherited property in question.

2. Determining how much money is needed for an irrevocable trust loan.

3. Funding a high six-figure or low seven-figure trust loan.

4. Distribution of an irrevocable trust loan, equalizing the amount of cash going to each beneficiary that is looking to sell off their inherited property shares.

5. Filing change-of-ownership, while keeping a legacy tax basis.

6. Mapping out how beneficiaries will repay a trust loan. 

Finally, a relationship with a trust lender is based on belief, and good faith, as all relationships are.  Plus results, which surface soon enough.

A Closer Look at 2022 Property Tax Portability & Exemptions for Seniors and Homeowners with Disabilities or Property Damage from a Natural Disaster

Property Taxes In California

Property Taxes In California

CA Proposition 19 Expanded Property Tax Breaks

The state of California now informs us that homeowners can transfer the taxable value of their original home to a replacement as many as three times during their life anywhere in the state. The expansion is part of Proposition 19, also called the Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act, that was passed in Nov of 2021.

Eligible homeowners are now able to transfer the taxable value of their primary residence to a “replacement residence” that is also a primary home – anywhere in California, within two years of the sale of the initial property.

Another improvement is the fact that this tax benefit can be taken advantage of three times in ones’ life, as opposed to homeowners’ previous ability to take advantage of this only once, and only in certain counties. Ironically, these property tax breaks offer homeowners relief from excessive limitations – while limiting tax measures such as the popular parent-to-child exclusion, or the ability to transfer parents property taxes and keep parents property taxes, inheriting property taxes, and property tax transfer in general, to avoid property tax reassessment.  Property tax breaks that have helped so many middle and upper middle class homeowners over the years.

Property Damage from California Wildfire

The proponents of Proposition 19 make sure that everyone knows how pleased they are that there are absolutely no limitations for homeowners whose homes were destroyed by wild-fire, or forest fire. This sounds generous, and in some ways it is. However, when you sit back and consider it carefully, it’s not terribly realistic.

You have to ask yourself – how many times in a lifetime is someone’s residence going to be destroyed or seriously damaged by wildfire, or a forest fire? If it’s more than once, it’s doubtful that it’s an accident. Yet the fact remains that California wildfires are spiraling more out of control year after year actually making new property tax breaks for homes damaged or destroyed by wildfires extremely relevant.

In fact, experts tell us that we are now experiencing the worst trend of wildfires ever seen in California, as there has been more wildfire damage in 2020—2021 for example that in the previous three years combined, with millions of acres and thousands of homes and structures having been destroyed by uncontrolled wildfires.

Replacement Property Transfers

However, as most Californians know by now, Proposition 19 has also revised how California residents are able to transfer their property tax base to a “replacement property” in other ways, now with the benefit of being over age 55; of suffering from a severe disability; in addition to owning property that has been damaged or destroyed by other forms of natural disaster such floods or earthquakes, which is not unrealistic, and is actually rather likely, at least in Southern California, just as wildfires are.

California State Board of Equalization (BOE) website Chairman Antonio Vazquez has said recently, “Seniors, the severely disabled, and victims of wildfires or natural disasters can now move to a replacement home anywhere in California and avoid significant property tax increases if eligible. Property tax relief can be beneficial for those especially on limited incomes or who have been affected by wildfires or natural disasters.” Even Mr. Vazquez avoids mentioning unlimited tax breaks during a lifetime for victims of wildfire.

Property Destruction by Natural Disasters

If your property is damaged or destroyed by a calamity, such as a fire, earthquake or flood, you may be eligible for property tax relief.  You may also qualify if you own damaged business equipment and fixtures; orchards or other agricultural groves; or aircraft, boats and certain manufactured homes.

Damaged or destroyed property can be reappraised based on its current condition, and your tax burden will be adjusted accordingly.  Property owners may be able to apply for a deferral of property taxes owed without penalties or interest until the county assessor has had time to reassess the property and correct the tax bill.

As for residential properties, homeowners must have been victimized by a minimum of $10,000 in property damage, or at least 10% of their property’s value, whichever is less, to be eligible for property tax exclusions, or exemptions. Once a home has been rebuilt, the tax basis will rebound to the pre-damage value. Moreover, the base year value of a damaged house can even be transferred for many homeowners.

CA County Tax Assessors

It is important to remember that homeowners claiming disaster caused property tax relief, or their legal representative, must file their claim with the County Tax Assessor’s office inside of 12 months from the date of the property damage; and can even extend the deadline, depending on the county.

County Tax Assessors throughout California can be located here.
 

Does a Change in Ownership Affect CA Property Taxes?

California Change in Property Ownership

California Change in Property Ownership

Californians who make it their business to know – now understand that triggering property tax reassessment to “a new Base Year Value” as a result of new construction to a home, or a complete change in ownership – which makes it virtually impossible to establish  a low property tax base; and results in a yearly tax rate that increases abruptly to  current or “fair market” rates.

Translation in everyday language – you pay much higher property taxes every year. For example, the different between $600 per year and $9,000 per year. Significantly higher property taxes.

Every County Tax Assessor in California, in all fifty-eight counties, records and reviews every single property deed in every county, to figure out which homes and various other real properties require reappraisal, and which do not. The Tax Assessors also determine ownership changes with other investigative tools such as such as kept records from homeowner self-reporting, or from records of building permits; from newspaper files; or field inspections.

When a County Tax Assessor has determined that a property has changed ownership, Proposition 13 stipulates that the County Tax Assessor must reassess that property to its current (i.e., fair market) tax rate, as per the date of change of ownership.

Because property taxes in California are based on a property’s assessed value – at the time of acquisition – the property taxes will be increased if the current market rate is higher than the original assessed Prop 13 base year value adjustment. Therefore – if the current market tax rate is lesser than the previous adjusted base year value assessment, then taxes on that property will go down. Which is what everyone wants.

It is important to note, however, that a portion of ownership of that property may be reappraised. Let’s say that 50% of a home is transferred under Proposition 13, and the changes that the Tax Assessor is going to reassess is 50% of the home at the current market rate, as per the transfer date, so 50% will be deducted from the base year value, under Proposition 13 property tax relief… 

Typically, when someone buys a home, the home goes through a “change in ownership” and 100% of the home is reassessed at full current market value.   Even if the outcome of transferring real estate is a change in ownership, there are a number of exclusions from paying current tax rates – and so certain homes or other real estate will often not be be reappraised under these sorts of home transfers.

If a property owner files the proper claim, an exclusion from paying updated current property taxes will kick in as long the owner’s property, or portions of this property, are correctly excluded from reassessment.

The best way to cover changes in ownership that are excluded from automatic reassessment, or reassessment by claim; is to enlist the help of a tax attorney, a property tax consultant, or a trust lender who specializes in establishing a low property tax base for heirs upon inheriting a home from a parent.

Frequently, this will assist beneficiaries in buying out inherited property shares from co-beneficiaries through a loan to an irrevocable trust, which realtors and property tax specialists call a transfer of property between siblings or a sibling-to-sibling property transfer – working in conjunction with a California Proposition 19  parent to child property tax transfer on an inherited home – a parent-to-child exclusion (from property tax reassessment at full, current market rates), to establish a low property tax base.  

Naturally, this line of property tax relief, based on a parent’s property  also includes the ability to transfer property taxes when inheriting property taxes from a parent. Under these tax breaks, a property tax transfer like this can help heirs keep parents’ property taxes basically forever, based on a parent-child transfer; or a parent to child exclusion from reassessment – to legally avoid property tax reassessment.

You can always consult your Tax Assessor, however it is generally in the Tax Assessor’s best interest to charge you the maximum amount possible. A property tax consultant or trust lender, on the other hand, is motivated to save you money on taxes, not see you spend more.

What Exactly is the Parent-Child Exclusion?

The Parent-to-Child Exclusion (from paying current property tax rates) applies to any real estate purchases or transfers between parents and children, which occurred on or after November 6, 1986…

CA Parent-to-Child Exclusion Benefits

This exclusion prevents an increase in property taxes when real property is transferred between parents and their children in California.  Formerly a crucial component of the wildly popular Proposition 58 parent to child property tax transfer,  or parent-to-child exclusion, is still a key tax break in the tax relief bundle under California  Proposition 19, as of Feb, 2021.

As we all know, this tax relief bundle works with property tax break components such as Proposition 13 transfer of property, the parent to child property tax transfer on an inherited home,  or a fast 5, 6 day loan to an irrevocable trust  under-pinning a transfer of property between siblings when buying out inherited property shares from co-beneficiaries. 

These tax benefits mainly revolve around property tax transfer – namely the inheritance based ability for heirs to transfer parents property taxes, to keep parents property taxes long-term after inheriting property taxes as long as it’s California real estate… Making good use of the Prop 19 parent-child transfer working in conjunction with Proposition 19 parent-to-child exclusion benefits and related tax breaks.

What is the definition of a “child” for the purpose of this CA exclusion?
Natural children, children adopted before the age of 18, step-children (as long as the parents are still married), foster children, and sons- and daughters-in-law are considered children under this exclusion program.

Avoiding Property Tax Reassessment in California

In other words, property that will avoid a tax hike would be the transfer of property value from a “principal residence” to another primary residence – plus any other property valued up to $1,000,000 going to children. Properties will not be reappraised if the Claim for Exclusion from Reappraisal form is filled out properly, filed and approved by the Tax Assessor’s Office.

Grandparent-Grandchild Exclusion

Real estate can be excluded from excluded from reappraisal when transferred between grandparent and grandchild, as long as a Claim for Exclusion from Reappraisal form is filed and approved by the Tax Assessor’s Office. And only if both parents of the grandchildren are deceased prior to property transfer to grandchildren.

Proper Claim Filing

Residences do not receive this type of property tax exclusion automatically. A completed “Claim for Exclusion from Reappraisal” is required. This form has to be finalized and filed with the Tax Assessor’s Office for approval.

Conversely, if you don’t file this claim the outcome is likely to be reassessment of your property taxes at fair market (i.e., current) rates. To avoid a supplemental tax bill, this claim has to be filed within 3-years of property transfer or the date the decedent passed away, prior to sale or transfer to a third party. A claim can be filed within 6-months after the mailing date of the supplemental notice or “escape assessment”.

If this claim is filed late, the exclusion can still be granted but no refunds will be received for prior years. It will be granted for the year the claim is filed as long as the property has not been sold to a third party.

Filing a Claim if Property Inherited From Parents is Sold

Reappraisal will occur for the period between the date of the death and the sale to the third party. A supplemental bill will be issued unless the heirs or beneficiaries apply and qualify for this exclusion.

Filing a Parent-to-Child Exclusion & Reappraisal for Seniors

Reappraisal Exclusion for Seniors is a one-time only tax exemption for residents age 55 and older to sell their primary residence and transfer its’ low property tax base to a replacement home. Since the sold property has to be reassessed or reappraised, heirs would not get a tax break from the Prop 19 parent-child transfer benefit.

PART ONE: The History of Property Taxes in California

The History of Property Taxes in California

The History of Property Taxes in California

Property Taxes Before and After World War Two

California no longer depended on property taxes as its’ principal funding source after 1912.  And after 1929, during the depression years, there were massive amounts of unpaid property taxes. In fact, some states excluded certain owner-occupied homes from property taxes altogether. Many taxpayers avoided purchasing tax delinquent homes and properties, and governments in some states enforced limits on property tax rates.

These so-called “homestead exemptions” became rather unpopular with the public at large as they tended to be wealthy homeowners,  with what was perceived as unfair property tax relief, and apparently reduced revenue to local governments that depended largely on property taxes from homes rather than other forms of real property.

During World War Two, state and local taxes were stabilized, or decreased, as spending programs were cut back due to decreased needs, or unavailability of building materials and other resources. This was reversed in the post-war years, after 1945,  as governments expanded social programs and took advantage of rising property value to increase tax collections.  Assessment rose, tax rates rose, and the newspapers ran stories of homeowners forced to sell their house mainly because of rising taxes. No one was keeping a low property tax base from parents when inheriting a home.

Once Germany and Japan surrendered to the Allies in 1945, and World War Two ended… most states replaced the “homestead exemption” with so-called “circuit breakers” which were state financed and clearly benefited blue-collar and middle class homeowners, senior and elderly homeowners, and disabled persons. In many states renters were included by tax measures that actually viewed certain rental payments as property taxes. (By 1991 there were 35 states with some sort of “circuit breaker” exemption in place). 

California Tax Revenue

Property taxes have now created a revenue stream for the state of California that funds changing needs of cities and counties, school systems, and what is referred to as “special districts”.

California’s primary source of state funding is now a combination of sales tax, income tax, excise tax, as well as banking and corporate taxes, and “use tax”, which is a sales tax on purchases made outside one’s state of residence for taxable items that will be used, stored or consumed in one’s state of residence and on which no tax was collected in the state of purchase.

California Property Taxes in the 1960s

During the early 1960s in California there were various scandals involving County Tax Assessors. These particular Property Tax Assessors were caught gifting personal friends and political associates with abnormally low property tax assessments, and unnaturally low tax bills.  Not at all like keeping a low property tax base upon inheriting property from mom or dad in 2021!

The Tax Assessor scandals brought about Assembly Bill 80 in 1966, which imposed standards to hold assessments to market value. The return to market value in the wake of AB 80 could easily represent a mid-double-digit percentage increase in assessment for many homeowners.

A huge number of homeowners in California were impacted with a significant increase in property valuation and tax rates, only to discover that this tax revenue was to be distributed to communities far away from where they resided.

California Property Taxes in the 1970s

This type of activity, distributing tax revenue to distant communities  created a widespread pessimistic attitude among middle class and blue collar homeowners towards the tax system in general, and it’s reportedly biased view towards wealthy, well-connected families.

This viewpoint grew throughout the state until the 1970s, when it morphed into a tidal wave backlash of anger against the existing property tax system. This gave apt. building magnate Howard Jarvis and his Taxpayer’s Association great momentum towards expanding and popularizing property tax relief in all 58 counties in the great state of California.

California’s Famous Tax Revolt That Led to Proposition 13

Within a few years the country was awash with truly emotionalized tax protests, often referred to as “The California Tax Revolt”. Almost every state imposed some sort of limitation on 111 property taxes, coming to a head with the widely promoted Proposition 13 – an amendment to the California constitution, passed by popular vote in California on June 6th, 1978, with nearly 2/3 of Californians voting for Proposition 13, reducing property taxes by 57% – establishing this to be the most effective assault on property taxes in American history.

The Proposition 13 amendment limited property taxes to 1% of full cash value; requiring real property to be valued at its March 1, 1975 value – or on the date it changes hands or is constructed after that date; limiting subsequent value adjustment to 2 % per year or the rate of inflation, whichever is lower.  This prohibited the sales impact or “transaction taxes” on the sale of real estate; and required a 2/3 majority vote in each house of the legislature to increase state taxes;  plus a 2/3 electorate vote to increase or add new local taxes.

Although Proposition 13 was the most well known initiative to limit property taxes, along with transferring property taxes from parent to child on a property tax transfer  from a parent.  Inheriting property taxes can offer a great upside, when an heir is able to keep parents property taxes. And of course have the ability to work with a trust lender when taking advantage of property tax relief from Proposition 13 and Proposition 19 (formerly Prop 58) and it’s flagship tax break, the parent-to-child exclusion, to avoid property tax reassessment and keeping a low property tax base when inheriting a home, as well as being able to buyout property shares from co-beneficiaries, typically siblings, with a  loan to an irrevocable trust.

Proposition 13 and Proposition 19 make it possible to continue keeping a low property tax base when inheriting a home, however they are not the only property tax measures to limit and control property taxes. Some limit tax rates, or property tax maximums. Other tax measures provide specific groups with limited but significant tax breaks; with some property taxes designed to promote various forms of economic development in various urban or rural areas. Interestingly enough, these tax measures included provisions favoring agricultural land, reduced taxation of owner-occupied homes, exemptions that  benefit seniors, or veterans, or the disabled, the elderly, or the poor. 

Economic incentives built into some of these property tax laws included lower rates on particular businesses, exemptions covering people of a certain age, tax breaks in developmental areas, and more….

>> Click Here for Part Two…

 

New Access for Homeowners to CA State Board of Equalization & Property Taxpayers’ Bill of Rights

Due to various changes  right now in California’s property tax relief laws, Proposition 19 is expanding certain tax breaks while limiting others;  creating new issues involving homeowners; often bringing their attorney or trust lender into the mix, for example utilizing Prop 19 and funding to a trust loan; as well as newer tax breaks, verified through direct communication with the California State Board of Equalization (BOE).

CA State Board of Equalization Aiding Homeowners

Right now, as 2021 moves into 2022, if problems with property owners deepen, Taxpayers’ Rights Advocate Lisa Thompson gets involved. The Advocate was appointed by the CA State Board of Equalization Executive Director Brenda Fleming, to work independently of the BOE, to help taxpayers resolve problems that cannot be resolved through conventional channels making sure homeowners understand every avenue designed to help them avoid property tax reassessment as far as property tax breaks are concerned…

It’s important for the Advocate to help homeowners understand how to use the BOE to confirm and use every possible tool at their disposal when transferring property taxes from parent to child is critical in order to keep parents property taxes after a property tax transfer, upon inheriting property taxes from a parent-to-child property tax transfer  –  and understanding how to work with a trust lender to take advantage of a parent-to-child exclusion from current tax rates… Often working in conjunction with Prop 19 and funding to a trust loan, when homeowners (i.e., beneficiaries) buyout inherited property from co-beneficiaries, while keeping a parents low property tax base.

The CA Taxpayers’ Rights Advocate

The Taxpayers’ Rights Advocate is allowed to involve the Morgan Property Taxpayers’ Bill of Rights, which allows the property owner to inspect and copy documents related to their property’s assessment. The Bill of Rights furnishes measures to encourage and verify fair administration of property tax laws in California.

The Advocate reviews how fair and effective the BOE and any given County Assessor is in terms of providing understandable information in printed and Website form to property owners; making sure the BOE  is doing their job properly; resolving complaints, taxpayer problems and general inquiries from the public such as how to use a parent-to-child exclusion, Prop 19 and funding to a trust loan.

The Advocate also looks for underlying causes of conflict between taxpayers and property tax assessors. The Advocate is responsible for creating and distributing a yearly report concerning property tax issues and property tax hikes affecting taxpayers’ rights. To support this, the BOE has public hearings to review this report and related property tax matters, opening up these meetings for questions and opinions from business property owners and homeowners.

The Property Taxpayers’ Bill of Rights provides ways to encourage and verify fair administration of property taxes.  Miss Thompson tells us:

We can help if you have a question regarding your rights or if you have a disagreement with the programs administered by the State Board of Equalization, or county agencies involved in California’s property tax system. Some taxpayers contact us to communicate their frustration with aspects of the property taxation system or seeking confirmation that they have been treated lawfully and fairly by a county or state office…

In cases where the law, policy, or procedure does not allow any change to the staff action, but a change appears justified, the Taxpayers’ Rights Advocate Office is alerted to a potential area that may need clarification or modification. Several past recommendations for policy, procedural, and legislative changes have resulted from these types of contacts with taxpayers…

Our office facilitates communication between taxpayers, the State Board of Equalization, and county staff to eliminate potential misunderstandings. Taxpayers are provided information on policies and procedures so they can be better prepared to discuss their issues with the appropriate staff and increase the opportunity to affect a resolution which will satisfy them.

As you can imagine, Advocate Lisa Thompson bolsters public confidence in the BOE and the office of The Taxpayers’ Rights Advocate.

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

Property Tax Transfer in California

Property Tax Transfer in California

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Property Tax Relief for All Americans, Not Just California

Property Tax Relief

Property Tax Relief

A recent survey from Ameriprise Financial:

  • Discovered that 65% of Americans have never written and   signed off on a Will;
  • 77% of Americans plan to leave a financial inheritance for their children or grandchildren;
  • 64% of Americans believe they are actually in a position to even leave an inheritance of any kind to their children;
  • only 50% of aging American parents have an estate plan in place reflecting inheritance assets being left to their children.

Some retirees are committed to leaving money and assets to their children; while other parents see it as “a good thing to do”… yet “not essential” as part of their plan for retirement. Not exactly a sign of high interest on the part of parents, is it, where leaving money to their children are concerned!

However, middle class and even upper middle class families in the United States are understandably concerned about cash flow, and the future of their net worth.  Exacerbated by increasing concern over the variant Covid virus issues; which further discourages  parents from leaving anything at all to their children upon passing away… virus or no virus.

These concerns are causing many families in America to believe that all states in America, not just California, should have tax relief laws benefiting middle class, lower middle class and upper middle class consumers, not just tax cuts and property tax breaks for wealthy residents.

Different state economists are looking specifically at property tax relief for their state, as this is one of the simpler areas to affect in this manner to help free up more consumer cash, and thereby improve their overall economy in this fashion, step by step.

Allowing beneficiaries of trusts and heirs of estates to be able to access genuine property tax relief… with the ability to get a loan to an irrevocable trust from a trust lender, when parents leave a home to them as an inheritance.  This enables these folks to keep their family home, inherited from parents, at a low property tax base.

This process also enables beneficiaries to buyout sibling beneficiaries – or as attorneys put it, “the transfer of property between siblings, without a direct sibling-to-sibling transaction” – by lending money to an irrevocable trust – typically from an irrevocable trust loan lender, who can guide your ability to buyout sibling beneficiaries, and show you how you’re putting a lot more cash in siblings’ pockets when you go through a trust loan to buyout sibling beneficiaries. The fact is, we need to know our rights, with respect to these unique tax breaks. 

Homeowners and beneficiaries in all states should know how to buy out beneficiaries’ shares of inherited property; and how sibling-to-sibling property transfer works. Moreover, all Americans should know how loans to irrevocable trusts can help co-beneficiaries get cash while avoiding selling their share of an inherited house – keeping yearly taxes on property at their parents low tax base.

All middle class Americans should be aware of  the California system, of California advantages of inheriting parents property and thus inheriting property taxes that are lower and can remain low. Property tax transfer is an unknown in so many states…whereas  inheriting a parents’ low property tax base, and avoiding property tax reassessment, as well as being able to buyout sibling beneficiaries with a trust loan – should be known to all, and be a normal state of affairs in all states.  It certainly is a “best kept secret” for wealthy families all across America!

Property owners in other states can surely find the time to start the ball rolling to start adopting these property tax relief laws, plus they should be able to see how these types of yearly savings free up cash for many homeowners to be able to purchase a larger home later on.

This would feed more sales activity and cash back into the local economy, with loans to trusts to avoid property tax reassessment, working in concert with new property tax measure that became active in Feb of 2021, California’s Proposition 19 – which used to be the ultra popular Proposition 58, enabling exclusion from current tax rates with a parent to child property tax transfer – along with Proposition 193 for grandparent-to-grandchild exclusion from high fair market rates.

Designing a system like this that has been so successful in California would keep property taxes at a much more equitable system state by state, whereas right now most states do not have a system in place similar to California are not offering middle and lower middle class families a sustainable system within which they can thrive and increase their spending ability.

Californians would then be able to give back more consistently into the general overall economy – inheriting property taxes they can afford, hence being able to maintain inherited property, while helping to increase overall intra-state consumer spending. Creating positive overall financial connectivity, instead of separate declining family spending capabilities, which do not benefit the whole at all.

Economists in many states now believe that within struggling families, if beneficiaries were able to transfer a low property tax base from parents, with an iron clad right to keep parents property taxes as a part of the inheritance process, from parents and grandparents – middle class, upper middle class, and working families would all benefit greatly, and at the end of the day their state would benefit as a whole as well.

If this system were in place in other states, families would be able to free up more cash to spend on goods and services all across their state, thereby benefiting merchants and other consumer businesses, benefiting their families, so they can spend more, moving more cash into the economy, and so on – benefiting each state economy all the way around in every state that shifted in this direction with property tax relief measures designed to help not only individual homeowners and beneficiaries but each state in general.

Saving money on inheritance based property transfers would (as it does in California) allow middle class and upper middle class beneficiaries who do not wish to sell out to keep their parents’ home in the family, which most middle class inheritors otherwise could not afford to do. And yet, unfortunately, California is still the only state that provides a systemic system to help residents avoid property tax reassessment at current, unaffordable rates.

This sort of property tax relief program… capped at 2% taxation, as offered by the 1978 CA Proposition 13 would allows residents in other states to keep parents property taxes, and inherit property taxes at a low property tax base… having the ability to use a Proposition 19 style property tax transfer, with a parent-child transfer or parent-to-child exclusion.