What Are the Crucial CA Proposition 19 Property Tax Benefits?

Posted on June 17, 2022 by trustandestate

CA Property Tax Benefits, 2022 Onward

Despite confusing, often deceptive messaging, designed at all costs to get Proposition 19 voted into law in The Golden State of California – it’s clear to most Californians that Proposition 19 property tax breaks really will increase property tax relief measures for homeowners over age 55, plus add exclusions from property taxes for homeowners who are victims of wild-fires and other natural disasters – plus homeowners who are seriously disabled.

Despite a little juggling with the facts, the slick promotion to get this tax measure voted into law, with attractive promises of improved tax exemptions… it did in fact appear to be a legitimate, believable package of property tax relief benefits for residents of the state of California — as long as you ignored the fine print.

What used to be Proposition 60 (voted into law in 1986, the same year Proposition 58 was passed), helped homeowners over 55 to sell their house and move into another home valuated at the same amount or less – in the same county – maintaining a low property tax base… This has been rolled into Proposition 19, and can be taken at face value… as long as the California State Board of Equalization (BOE) continues to function as a non-political, fact-based source of CA property tax info – which, according to experts and state economists, it does appear to be doing.

Experts Weight in on Proposition 19

Gaye Chun, the City National Bank wealth planner confirms, telling us: “The idea was to make it easier for seniors to move without worrying about a huge jump in their property tax bill that might be difficult for them to pay.”

Bruce M. Macdonald, an attorney with Carico Macdonald Kil & Benz LLP in El Segundo, CA agrees, stating, “If someone over 55 sold a house for $5 million, but they were paying taxes on a lower assessed value based on their original purchase price, they could buy a new house for $2 million and still pay taxes at their original, lower tax assessment.” No doubt, a truly significant improvement to a tax hike reflecting current or “fair market” property reassessment.

Tax Assessments and Property Tax Breaks in California

Property taxes are typically based on assessed value rather than current fair market value. In most states, tax assessments are conducted every one to five years and are not changed when a property is sold or transferred as a gift or inheritance.

In California, to everyone’s relief, property tax relief measures have been voted into law to limit tax assessed value of property, as well as capping property tax rates, plus enabling beneficiaries inheriting property from parents to avoid high property tax reassessment – establishing a low property tax base right away, when inheriting a home from parents.

Much has been said about property tax relief on the critical side, by realtors and high net worth business people that benefit from tax increases… However, if you talk to working families, middle class Californians, and even upper middle class homeowners – you will hear nothing but praise for property tax relief laws such as Proposition 13, passed in 1978; and Proposition 58, passed in 1986 – enabling middle class families to avoid CA property reassessment… making tax breaks available to homeowners and beneficiaries such as property tax transfer; with the ability to transfer parents property taxes when inheriting property while keeping a low property tax base; with the right to keep parents property taxes basically forever… inheriting property taxes without issue from Dad or Mom whenever they pass.

Giving beneficiaries the ability to avoid CA property reassessment through parent to child transfer and a parent-to-child exclusion is a major asset to middle class residents in California; as well as being able to take advantage of Proposition 19, in conjunction with a loan to an irrevocable trust to buyout siblings’ share of inherited property – keeping a close eye on mistakes to avoid when transferring a property tax base. Now, the ability to avoid CA property reassessment and other property tax relief benefits are under serious threat.

All of this was planned, launched and protected by Howard Jarvis and his famous Taxpayers Association, as well as others who joined in the effort beginning in the mid 1970s, when property tax increases were basically out of control… often forcing elderly widows and others living on a fixed income, literally onto the street with their furniture piled up around them on the sidewalk!

Not the way anyone with a conscience would want elderly Californians to end up, in the Autumn of their life – simply to benefit a few real estate firms who will make more money from increased sales (with more homes for sale due to increased inability to pay rising taxes), with the CA Legislature piling up tax revenue higher and higher as property tax revenue increases. Perhaps helpful to a few in the short term… but with dire consequences in the long term for the entire state.

Experts Weigh In on CA Property Tax Relief

“In 1978, California voters approved Prop. 13, a constitutional amendment known as ‘The People’s Initiative to Limit Property Taxation’ that was meant to protect older residents who were unable to keep up with large property tax increases”, Gaye Chun tells us; and adds, “Several propositions since then have tinkered with property taxes.”

“Homeowners who plan to transfer their residence to their children now or as part of their inheritance should seek professional advice, so they understand the impact of the new property tax rules”, asserts Bruce Macdonald, the well known attorney in El Segundo.

“Current changes in property tax rules could be significant for some families, because it’s not that unusual in California to have a house that was assessed at $150,000 when the parents bought it, to be worth $5 million 40 years later,” Mr. Macdonald, Esq. explains; adding, “When the kids could inherit their parents’ house at the assessed value of $150,000, the property taxes would be approximately $1,500. Now, if the house is assessed at $5 million, that would incur a significantly higher tax bill!”

Experts in California tell us that this points to all the more reason for repealing Proposition 19… as well as adding more concrete protections to keep Proposition 13 safe from anti-property-tax-relief realtors and the politicians that are firmly in their pocket.

Article 13-A of the California Constitution

Posted on April 25, 2022 by trustandestate

Protecting Californians From Arbitrary Tax Hikes

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

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

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

Property Tax Postponement Instead of Property Tax Relief

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

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

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

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

How Secure is Property Tax Relief for Californians?

Posted on April 19, 2022 by trustandestate

Property Taxes in California

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

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

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

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

Howard Jarvis Taxpayers Assoc president Jon Coupal tell us:

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

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

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

Special Interest Groups Intent On Unraveling Tax Relief

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

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

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

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

CA Property Tax Relief Heroes ~ Fighting the Good Fight

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

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

Posted on April 6, 2022 by trustandestate

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

CA Proposition 13: Consistency and Necessity

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

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

Stabilizing CA Property Taxes Throughout All 58 Counties

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

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

Before Prop 13: An Epidemic of Elderly & Retiree Foreclosure

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

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

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

California Property Tax Relief: Facts and Case Studies

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

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

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

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

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

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

Posted on April 6, 2022 by trustandestate

Avoiding Property Tax Reassessment on an Inherited Home for Californians

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

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

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

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

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

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

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

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

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

Understanding New Prop 19 Rules & Calculating Taxable Value

Posted on March 23, 2022 by trustandestate

California Proposition 19 Property Tax Transfer

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

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

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

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

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

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

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

Selling An Old Home – Distributing Cash Equally Among Heirs

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

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

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

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

What to Look For in an Estate & Trust Lender

Posted on March 17, 2022 by trustandestate

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.

Leaving Heirs Property & Assets in a Trust to Avoid Sibling Conflict

Posted on February 17, 2022 by trustandestate

Conflict Among Heirs Inheriting Assets

Squabbling among siblings frequently erupts right after a parent passes away… when the time comes to divvy up real property shares, investment and liquid assets, as well as cash in an estate. Moreover, this in-fighting often results in lengthy and expensive litigation.

Therefore, to set the estate stage properly, to organize the equitable sale of all assets and valuables, to equally split real property, cash accounts, investments, and liquid assets… plus correctly establish productive, two-way communication among siblings prone to conflict and squabbling over money, with an objective, neutral party or familiar family lawyer to act as a mediator to resolve inheritance conflicts among siblings after a decedent has passed away.

However, when middle class parents pass away, leaving a home to several beneficiaries when there is little else to inherit, this frequently results in a heated conflict between one or more siblings who want to sell their inherited home, and the siblings who insist on keeping their family house along with parents’ low property tax base. As we all know, this can lead to a protracted, bitter battle of wits and words.

An Irrevocable Trust: Working in Conjunction with Proposition 19

The one proven solution to this sort of struggle, to end the squabbling for good, is for one side, generally the beneficiaries looking to keep their inherited home, a loan to a trust to buyout siblings looking to sell their inherited share, buying out sibling property shares, with a sibling to sibling property transfer, avoiding property tax reassessment and keeping a low property tax base.

Generally a high six-figure or low seven-figure loan from a trust lender to an irrevocable trust works in conjunction with Proposition 19, leaving beneficiaries who are keeping the family house with a Proposition 13 protected, low property tax base.

This avoids the need to work with a broker or realtor, therefore avoids a 6% commission, legal fees, transaction charges, etc. – providing a good deal more cash to the beneficiaries trying to sell the home than an outside buyer would tend to offer, or could offer.

Resolving Sibling Conflicts with Trust Based Estate Planning

That is to say, thinking ahead to resolve sibling conflicts. Planning an estate with a concrete will and/or trust, with heirs in mind, prior to death can avoid many of the problems between siblings after a surviving parent passes away.

If a parent leaves concrete instructions in a trust and/or a will as to which sibling receives what in terms of cash accounts, real estate, personal property, investments, antiques, lucrative artwork, liquid assets, valuables, important jewelry; etc.

A wise parent will leave clear instructions how a house is to be inherited, or possibly how it is to be sold, and how the proceeds are to be divided. Some siblings may receive more than others; some or one may be disinherited. All of these decisions may result in bitter conflicts later on.

Planning in Advance to Thwart Mercenary Heirs

Obviously, leaving an even share of assets, valuables, cash, and real property, in black and white, in a will and/or trust, would tend to avoid conflict – however this may not be what the decedent wanted. And even if all inherited assets are split evenly, there are often greedy heirs who want more, and manipulate to get more. And this is where a trust loan buyout can come in handy, with the assistance of a trust lender.

A parent can leave a revocable trust that can be changed at any time up to death, placing property in the joint name of a parent and child so that a bank account, brokerage account, or real estate can pass automatically to children/beneficiaries when the parent dies – to avoid conflict.

Using a cordial executor or trustee for the estate who does not gain anything in any way can also help avoid conflicts, although sometimes they start them! So choosing the right person becomes a critical decision for the parent.

Are Benefits from CA Proposition 19 Mainly for “Elites” in 2022 as the Press Tells Us – or for the Middle Class?

Posted on February 4, 2022 by trustandestate

Property Tax Transfer in California

California is the only state in America that provides genuine property tax relief, as opposed to deceptive tax deferment, to residential and commercial property owners and middle class families – specifically in the form of Proposition 13, and now Proposition 19 – for instance a Prop 19 (Prop 58) parent-child exclusion – along with capping yearly property taxes at 2%… when transferring a parent’s low property taxes to an inherited home, moving into their old family home as a primary residence, with a comfortable 12-months to settle in.

The problem is, critics of property tax relief in general continue claiming that these tax breaks are mainly helpful to homeowners that are well off… as they out it, “elite homeowners”. With no statistics to back up this often repeated claim. We hear quotes such as, “Instead of helping the middle class, property tax relief in California allows a wealthier class of citizens to take greater advantage of their predecessors investments.” This simply is not accurate.

First, as we all know, wealthy folks make up a small percentage of the general public – and the same simple equation applies to homeowners. In microcosm, the majority of families that take advantage of property tax relief in California, that avoid property tax reassessment, are in fact middle class or upper middle class… Not millionaires as the LA Times or San Fran Chronicle would have you believe.

The same 2% to 3% of ‘haves’ versus the 97% to 98% ‘have-nots’ equation – reflecting stark wealth disparity among homeowners all across California holds true when it comes to using property tax breaks to avoid property tax reassessment – to save money… that middle class and upper middle class residential and commercial property owners do not have to throw around on unnecessary tax hikes!

Can you picture genuinely wealthy families that own multi-million dollar homes (that the press continues to inform us are the only property owners gaining genuine benefit from Proposition 13 and Proposition 19) – taking the time to go through property tax break processes, simply to save a few thousand dollars every year? Families with 7 and 8 or 9 figure incomes?

We can cast serious doubt on that one. Yet newspapers like the LA Times and San Fran Chronicle still continue to pitch this in Op-Eds as a realistic scenario.

Yes, there are wealthy investors out there who did take advantage of Proposition 13 tax breaks, for investment properties that would rent out to tourists.. However, this is a fraction of the general home-owning public, and the bulk of folks using these tax break are middle income and even upper middle income residents. They’re not famous, wealthy celebrities like, for instance, the Bridges family…

The Bridges family. The one and only tale of a rich and famous family “taking advantage” of property tax relief to rent out fancy homes on the beach to upscale vacationers. Repeated over and over and over again as a cautionary tale, in the press, curiously without any similar stories bring referenced about any other wealthy family in California. It is curious that not one other family has ever been named or blamed for this type of inheritance / tax break activity, over 3 decades.

To the sheer joy of County Tax Assessors – Californians without proper counsel from a trust lender or a property tax consultant, or estate attorney, stumble into anticipated property tax mistakes. Generally caused by not filing deadlines properly, or not comprehending complicated legal subtleties; or by not claiming an exclusion or exemption from property reassessment which is staring them right in face.

Without advice from a property tax consultants, or life-saving legal counsel from an extremely experienced trust administration / property tax relief attorney like Partner Rachelle Lee-Warner, Esq. — at the Cunningham Legal law firm. Or a reliable lender specializing in loans to trusts and estates, like Commercial Loan Corp for example, led by inspirational president Kerry Smith, in Newport Beach… Helping heirs inheriting property with a Prop 19 (Prop 58) parent-child exclusion to establish a low property tax base when inheriting a home – also frequently buying out inherited property shares from siblings (co-beneficaries); or helping with the transfer of property between siblings, with a loan to an irrevocable trust… working in conjunction with Prop 19.

Experts like this specialize in helping beneficiaries and homeowners save on property taxes, avoiding property tax reassessment with Proposition 13 and/or Proposition 19; mainly focusing on Property tax transfer, the right to transfer parents property taxes and keep parents property taxes basically in perpetuity, when inheriting property taxes through a parent-child transfer, typically the popular Prop 19 (Prop 58) parent-child exclusion.

It’s worthwhile contacting a trusted expert, rather than accidentally triggering property reassessment that may increase your property taxes five-fold or ten-fold. A significant tax hike to say the least!

Let’s use the North Bay area in northern California as an isolated microcosmic example of how it is chiefly middle class and upper middle class property owners that have responded to property tax relief measure Proposition 19, for example…

The North Bay Business Journal informs us:

California’s Proposition 19 has prompted a seven-fold increase in requests to county assessors to transfer property throughout the North Bay. Barbara Green, the Change-of-Ownership Supervisor in the Sonoma County Tax Assessor’s office, tells us, “It’s crazy! We’re just catching up….”

“….[Thanks to Proposition 19] middle class homeowners in Sonoma, Napa and Marin counties flooded County Tax Assessors with a load of filings. Sonoma County has taken in 917 filings through Feb. 5. The usual rate is 193 for the three-month period when compared to the previous year. Although a smaller jurisdiction, Napa County’s government offices are in the same boat. Residents put in 175 of the forms to pass down their properties within the family. Marin County has received 600 more property transfer applications than its usual 54 parent-to-child transfers of property….

Proposition 19 allows homeowners over age 55 to keep a better tax rate when they sell one house and buy another. It took effect on April 1 and applies to anywhere in the state. It’s about as far reaching as the housing tax revolt of Proposition 13 that passed 1978. There is a fever pitch of reaction within North Bay counties… for filing the parent-to-child property transfer.”

North Bay banking, accounting & law firms have all been experiencing a huge increase of calls over the past few months from prospects and clients. And we’re not talking about millionaires calling in or strolling into those offices.

PART ONE: The History of Property Taxes in California

Posted on December 1, 2021 by trustandestate

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…

California Property Tax News

Property Taxes and Transferring Property Taxes in California

Tag Archives: Proposition 13