The Function of a CA County Assessors Office

The Role of the County Assessors Office

The Role of the County Assessors Office

The CA County Assessor’s Job

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

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

Principle Tax Assessor Responsibilities

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

Four critical duties Tax Assessors must address are:

1. Locating taxable property

2. Identifying the owners of all taxable real estate

3. Determining the assessed value of all taxable property

4. Publishing yearly assessment rolls, plus supplemental reporting

Locating Taxable Real Estate

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

Property Assessment:

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

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

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

Reappraising Real Property in California

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

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

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

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

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

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

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

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

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

The History of Property Tax Relief in California

California Property Taxes

California Property Taxes

An Historical View of Property Tax Relief

A property tax measure entitled “Proposition 13” locked in property tax relief in 1978 that, despite efforts from certain parties to turn the clock backwards for financial reasons, California has managed somehow to maintain for middle class and upper middle class homeowners and beneficiaries inheriting parental property.

This tax relief process, along with Proposition 58 in 1986, providing residents with a means to establish a low property tax base, and to transfer a home from parent to heir with a parent-to-child exclusion from paying current property tax rates…. While keeping a low parental property tax base.

Traditional banking and other lending institutions no longer provide Californians with loans that solve financial requirements for irrevocable trusts, estates, probates, conservators, and other non-traditional inheritors and borrowers. We now must look to Trust Lenders to bridge this financing gap when it pertains to funding trusts, to buyout co-beneficiaries, siblings typically… as well as locking in a Proposition 13 protected low property tax base, with tax rates that cannot exceed 2%.

Property tax breaks like property tax transfers and the parent-to-child exclusion; the right to transfer property taxes that cemented the foundation of Proposition 58 – now in the foundation of Proposition 19…. With some restrictions that, regrettably, many Californians were not fully aware of when they cast their property tax vote in Nov of 2020.

Property Tax Relief – Involving Prop 13 & Prop 19 Trust Loans

The process that makes up the robust foundation of Prop 13 and Proposition 58, now Proposition 19, has managed to survive despite fluctuations and changes throughout 2020 and 2021, enabling funding of a trust or estate to allow equalization of distribution to beneficiaries inheriting property that are looking to sell out their property shares; while those looking to keep inherited property get to establish a low property tax base, and avoid property reassessment.

Your situation may reflect elements sin one or more of the following inheritance scenarios – frequently requiring a non-traditional solution; typically an inheritance funding assignment, or the funding of an irrevocable trust… Trust lenders like Commercial Loan Corp offer a free consultation in which some of the following scenarios and options will most likely be discussed – 

a) Siblings may be going through intra-family conflicts concerning which assessed evaluation of the property in question reflects the “true value of the property”; or confirming which beneficiaries want to keep inherited property, at their parent’s low property tax base – and which siblings insist on selling their property shares to a buyer, at which point it becomes obvious that a buyout from a trust will furnish beneficiaries looking to sell with far more cash than a typical buyer going through a realtor will provide – by avoiding a realtor’s 6% commission, additional fees, legal costs, etc. 

b) Does your family agree there is a need for a loan to an irrevocable trust, or an estate loan. An experienced trust lender is able to fund an intra-family trust that will furnish enough liquidity to equalize funding to all beneficiaries intent on selling off their inherited property shares… while at the same time establishing a low property tax base for heirs that are committed to keeping the family home — avoiding property reassessment in conjunction with Proposition 19.

c) Does your family agree to a specific loan amount required to liquidate an irrevocable trust; to “equalize” buyout cash for beneficiaries within a middle class or upper middle class family that wish to sell off their inherited property shares. Property value and whether or not all the siblings agree on the assessed evaluation, the amount of liquid assets in a trust, as well as the number of siblings set on selling their property shares — influence the liquidity requirements of an irrevocable trust.

d) “Funding equalization” and “cash distribution” should be reviewed during a free consultation – insuring that equalization will result in a sufficient amount of funds being directly distributed to all beneficiaries intent on selling their inherited property shares. Therefore, change of ownership will handled properly and filed to ensure an exclusion from reassessment (i.e., a “parent-to-child exclusion”, often called an “exemption”) – bottom line, making sure that the family can avoid property tax reassessment, keep parents property taxes when inheriting property taxes  becomes a reality.  Property tax transfer, the ability to keep parents property taxes, is still a bottom line property tax relief benefit in California.

The heir or beneficiaries keeping the home pays back the trust loan with personal funds, or with a conventional loan, or through some other means of repaying the irrevocable trust loan.  Keeping the finalization of the process as straight forward as possible. It must appear to be simple, and in a way actually be simple, or residents will shy away from it, if they can’t understand how it works, even in a general way.  

New CA Parent-Child and Grandparent-Grandchild Property Transfer Rules Under Proposition 19

California Prop 19 Rules for Transferring Property Taxes

California Prop 19 Rules for Transferring Property Taxes

As an updated review of sorts, we would like to revisit certain Proposition 19 issues governing California property taxes. These issues have become particularly important to beneficiaries and new homeowners in particular throughout the state. The following updates address measures that are especially popular with homeowners…

In terms of basics, it’s important to reiterate that under Proposition 19 an inherited home can be transferred from a parent to their child/heir without triggering property tax reassessment, with the right to keep parents CA property taxes. However it’s essential these days to pay more attention to deadlines and filing stipulations — whereas previously this was not as necessary.

Beneficiaries frequently want to know if a parent died prior to Feb 16, 2021, but the change in ownership forms were not filed with the assessor until after Feb 16, 2021 — if the parent-to-child exclusion (from current property tax rates) is applied under former Proposition 58 measures, or if it is applied under current Proposition 19 tax measures, with the ability to keep parents CA property taxes…. The confirmed answer is that an inherited property transfer is calculated by date-of-death to determine the official date of change of ownership.

A good number of trust beneficiaries inheriting real property from a parent, considering their option to buyout siblings’ inherited property shares, often ask trust lenders if a parent is leaving a family home to three siblings/heirs, will that family home be the primary family home of all three heirs — or just the one heir.  And it turns out that only one sibling/heir is expected, under California tax law, to take over that family home as a primary residence. Yet all three siblings still have to be valid heirs.

Beneficiaries and heirs of an active estate, inheriting assets, often ask their attorney about the correct time-frame to establish an inherited family property as their “primary family home”…  Estate attorneys typically confirm that beneficiaries inheriting a house from a parent who wish to keep parents CA property taxes on a property tax transfer, when inheriting property taxes, are expected to establish that house as their “principle family residence” within 12-months of the purchase or transfer of that inherited property, if they want to avoid property tax reassessment using their existing ability to transfer parents property taxes, when inheriting property taxes from a parent. 

Yet heirs are still being able to take advantage of their right to a parent to child property tax transfer on an inherited home  and a  parent-to-child exclusion; even with all these confusing and sometimes baffling new rules for property tax transfers in California  additional intra-family options are available to heirs such as buying out co-beneficiaries’ property shares on a sibling-to-sibling property share while keeping a low property tax base when inheriting a home.

If beneficiaries or heirs are inheriting a family farm, they often look to their estate lawyer, or trust lender, for answers… if they are looking to buyout co-beneficiaries to retain the inherited property for themselves – at their parent’s low property tax base – to find out if the Proposition 19 parent-to-child exclusion (from current tax rates) also applies to family farms.

In other words, does a family farm also have to be a principal or primary residence of the inheriting beneficiaries or heirs… And the answer is no, the family farm does not have to be the principal residence of the inheriting parties in order to qualify for the parent-to-child exclusion. A family farm is viewed as any real property which is under cultivation or which is being used for pasture or grazing, or that is used to produce an agricultural product.

Many Californians want to know if Proposition 19 is retroactive; if property transfers that have already benefited from Proposition 58 parent-to-child exclusion benefits are going to be reassessed… And they are informed that Proposition 58 applies to transfers that were implemented on or prior to Feb 15, 2021. The current Proposition 19 ability to keep parents CA property taxes applies only to transfers that take place happen after Feb 16, 2021.

An inherited house, when transferred from a parent to their child/heir – is expected to be the “primary family home” of an heir. Beneficiaries or heirs frequently ask their property tax consultant or attorney how long they need to reside in or maintain their inherited property as “a primary family home” to be able to retain the parent-child exclusion. The answer is unequivocally that the Prop 19 exclusion applies only as long as the heir, or beneficiaries, reside in inherited  property as their “principle family home”.

In the event that a family home is no longer used as the primary residence of a beneficiary inheriting a home, that property should receive the factored base year that applies, had the family home not qualified for exclusion at the time of purchase or transfer. The new taxable value will be the fair market value of the home on the date of inheritance, adjusted yearly for inflation. 

Hence, an updated look at certain new parent-child and grandparent-grandchild property transfer rules and regulations under Proposition 19. 

FAQ: Property Tax Transfers & Taxes on Inherited Homes

Trust Loan Question and Answers

Trust Loan Question and Answers

California Proposition 19 Trust Loan Questions and Answers

If you are staying abreast of updates and news, concerning property tax relief in California, you are most likely aware that there is still some confusion among homeowners as far as where Proposition 58 leaves off and Proposition 19 picks up… with respect to tax breaks like the parent-child exclusion, low tax base issues, and all property tax benefits associated with property inherited from a parent.

We will attempt to dispel some of that homeowner confusion here today through  some well worn questions and answers among beneficiaries, estate & tax attorneys, property tax consultants and trust lenders in California.

Q: If we forgot to apply for the parent-to-child exclusion before Feb 16, 2021, can we still qualify for this exclusion anytime thereafter in 2021 to avoid property tax reassessment through Proposition 58 and Prop 193 for the grandparent-grandchild exclusion?

A: As long as the change in ownership of your property from your parent took place on or before Feb 15, 2021, the transfer will qualify for the exclusion under Proposition 58/193. The date of death is the same as the date of the change in ownership. However, bear in mind that your claim has to be filed with your County Assessor within 3 years of the date of transfer (or prior to transfer to a third party) or within six months of the date of notice of “supplemental” or “escape assessment”. So no, your actual claim did not have to be filed by Feb 16, 2021.

Q: Regarding Proposition 19, if I inherit my parent’s family home and move into it as a primary residence, do I have to reside in that house to take advantage of the parent-to-child exclusion? Can I move somewhere else?

A: Apparently at least one beneficiary has to reside full time in that family home in order to avoid property tax reassessment with the parent-child exclusion. Once that property is no longer your full time home it will be reassessed at current market rates.

Q: Property transfers were executed under Prop 58 prior to Prop 19 becoming law on Feb 16, 2021. Is it true that Proposition 58 can also apply to property transfers after Feb 15, 2021?

A: No, it is Proposition 19 that will apply to property transfers after Feb 16, 2021.

Q: How does Proposition 19 affect my inherited property that’s being held in an irrevocable trust?

A: First of all, the trust governs the property. For a home held in trust, tax law states that a change in ownership occurs when real property goes to anyone other than the trustor or the trustor’s spouse or “domestic partner” when a revocable trust becomes irrevocable, and cannot be revised. The date of the decedent’s passing is viewed as the date of change in ownership. Proposition 19 states that Prop 58 applies to transfers that were executed before Feb 15, 2021. Proposition 19 applies to transfers that occur after Feb 16, 2021.

Q: If a family home is given to three sibling beneficiaries as a gift, must all three siblings reside in this home as a primary residence in order to take advantage of the Prop 19 parent-to-child exclusion?

A: As long as at least one sibling inheriting this property continues to live in the home as a primary residence, or principal residence, the exclusion will remain active for that property, and that beneficiary.

Q: Does Proposition 19 apply to a property transfer of a rental home, as Proposition 58 did?

A: No, under Proposition 19 the parent-child exclusion from reassessment applies only to the transfer of a family home that remains the principal residence of the beneficiary that moved in and continues to live there.

Q: If the value of my inherited home is more than $1,000,000 exactly what are Proposition 19 rules and regulations concerning the parent-to-child exclusion?

A: Under Prop 19 it is the sum of the factored base year value plus $1,000,000. Should the assessed value exceed this limit, you can benefit from partial property tax reassessment, or partial property tax relief. The amount greater than the excluded amount would be added to the factored base year value.

Q: If my county Tax Assessor doesn’t know about the passing of my Dad before Feb 16, 2021, and becomes aware of his death 15 months later and so reassesses the property I inherited from my Dad on the date of my Dad’s passing… Is a parent-to-child transfer or  parent-to-child exclusion applied through Proposition 58 or Prop 19?

A: The law in effect today tells us that the date of death will apply. It has been made clear that Prop 58 applies to an inherited property transfer from a parent on or before Feb 15, 2021.  It’s important to remember that California Proposition 19 applies only to property transfers that go through after Feb 16, 2021.

Q: Now that Prop 58 parent-child exclusion has morphed into Prop 19 property tax breaks, how do I apply for the homeowners’ exemption or disabled veterans’ exemption within 12 months of the transfer to qualify for a parent-to-child exclusion and grandparent-to-grandchild property transfer exemption from fair market property tax rates, as dictated by Prop 19? Who can help me apply for homeowners’ exemption or or disabled veterans’ exemption in my county?

A: To keep it simple, a claim will have to be filed with your County Tax Assessor, who will be on the BOE list of all California Tax Assessors;  and who will inform you as to what forms to complete, to apply for the homeowners exemption or disabled veterans exemption.

Is There Support in California to Reverse Potential Property Tax Hikes?

Are Trusts Only for the Wealthy

Are Trusts Only for the Wealthy

California Assembly Constitutional Amendment 9  

As most Californians know by now, CA Assemblyman Kevin Kiley introduced property tax measure ACA 9 to try to return long term property tax relief benefits to their original state.

Specifically, Assembly Constitutional Amendment 9 focuses on strengthening and bolstering parental property tax transfer in California, meaning the parent-child transfer and popular parent-to-child exclusion – which still gives Californians the ability to transfer parents property taxes and  keep parents property taxes when gifting or inheriting parents property.  As well as buying out co-beneficiaries’ property through Proposition 19, formerly Prop 58, in conjunction with a loan to an irrevocable trust; establishing a low property tax base upon inheriting a home… and always bearing in mind California’s long running right to avoid property tax reassessment. 

All California property tax relief rights were, and still are, hand-in-hand with the overall ability to transfer property, parental property tax transfer mainly, during inheritance from parent to child, and a tax break that is still protected by property tax measure Proposition 19 – mainly affecting middle class beneficiaries inheriting property, and mid-income homeowners residing in all 58 counties in California, and yet not fully understood by many residents.

California Proposition 19

Proposition 19 passed on Nov 3rd by a slight majority, following a very effective $40 million promotional campaign mostly paid for by the California Association of Realtors (the C.A.R.);  highlighting property tax breaks that favored residents over the age of 55, as well as sentimental favorites, such as school children and firefighters.  The campaign rivaled anything Madison Avenue could have come  up with!

Soon after Feb 2021, Californians and local media began to discuss Proposition 19 in terms that characterized Proposition 19 parental property tax transfer rights — enabling families to transfer property taxes to and from anywhere in the state — as basically replacing   Proposition 58 property tax breaks, a long-standing property tax measure that was voted into law in 1986 with a 75% voter majority; after a unanimous vote in the Legislature placed it on the ballot. Proposition 58 amended the state constitution to permit parents to transfer a home of any value and up to a $1 million of other property — such as a vacation cabin, rental property or small business – avoiding property reassessment.

Protecting Property Tax Relief & the CA American Dream

“The opportunity to own a home is central to the California Dream, but our state’s affordability crisis has put this beyond the reach of too many working families,” Kiley said. “Now, thanks to a Special Interest deal, Californians face a large and unplanned-for tax increase when they pass down property to their children. ACA 9 restores a vital protection that was in place for 35 years.”

As certain residents and activists try to change certain confusing revisions to property tax relief in California, they also acknowledge positive property tax breaks, such as benefits for property owners over 55 years old, who are eligible for tax assessment transfers; people with severe disabilities, victims of wildfires and other natural disasters; as well as sentimental favorites such as fire-fighters and school children. And who is going to deny eligible homeowners like that.

Positive property tax relief measures allow eligible homeowners to transfer their tax assessments anywhere within the state and allow tax assessments to be transferred to a more expensive home with an upward adjustment. The number of times that a tax assessment can be transferred increased from one to three for persons over 55 years old or with severe disabilities (disaster and contamination victims would continue to be allowed one transfer).

California Assembly Constitutional Amendment 9 focuses on parents and grandparents transferring primary residential properties to their children or grandchildren while avoiding property tax reassessment. ACA 9 also addresses issues revolving around parents and grandparents transferring vacation homes and business properties to their children and  grandchildren; with the first $1 million exempt from re-assessment when transferred.

Limitations on One Hand & Huge Benefits on the Other

Now, it’s true that there are some limitations in certain circumstances. People who want to take advantage of the parent-to-child exclusion and grandparent-grandchild exemption must move into their inherited property as a primary residence, which many residents want to do anyway, and they do have an entire year to move in. 

On the other hand, senior rights being a central issue  for middle class and upper middle class families in California, residents over the age of 55 have a whole suite of new property tax benefits, along with folks with disabilities, and victims of natural disasters such as  earthquakes and floods, as well as forest fires (which are extremely timely these days in California, especially for middle class residents).

When inherited property is used as a primary residence but is sold for $1 million more than the property’s taxable value, an upward adjustment in assessed value would occur. The ballot measure also applied these rules to certain farms. Beginning Feb. 16, 2023, the first $1 million is adjusted each year at a rate equal to the change in the California House Price Index.

Jon Coupal, president of HJTA, weighed in on the new activities designed to reverse any questionable changes to California property tax relief. Mr. Coupal stated: “The Howard Jarvis Taxpayers Association is proud to support ACA 9 to reinstate Propositions 58 and 193, reversing any stealth tax increases on California families!”

No one could have put it any clearer.

How the Role of a Trust Lender Can Impact Beneficiaries in California

Trust Loans in California

How to get a trust loan in California

As most Californians know, property tax measure Proposition 13, voted into law in 1978, capped property tax rates at 1%–2%. Property could now be reassessed on a property transfer from parent to child, with the right to transfer parents property taxes protected by the parent-to-child exclusion which was folded into tax measure Proposition 58, voted into law in 1986, and as you know is now revised, having morphed into 2021 Proposition 19 property tax law, with new rules for property tax transfers in California…

This continued the exemption for property transfers between parent and child, avoiding property tax reassessment with the right to transfer parents property taxes when inheriting property taxes from a parent; with the ability to keep parents property taxes long-term with this type of standard Proposition 19 protected property tax transfer, parent to child transfer and of course parent to child exclusion.

When there is only one heir, child of the parent, property transfer is relatively simple, knowing you have the right to transfer parents property taxes involving only one heir.  Conflict typically surfaces only when there are two or more siblings inheriting property shares… with one heir looking to retain the parent’s home, while the other heir or heirs insist on selling off their inherited property shares; generally calling for a “non-pro-rata” trust distribution, meaning that each heir with an interest in the inherited property receives an equal proportion of the entire estate with the help of a trust lender and a Prop 19 trust loan – however not necessarily of each asset. It’s important to note that non-pro-rata distribution by a trustee can have a major impact on property taxes.

Not using a Prop 19 trust loan solution, the use of personal funds to pay off a sibling co-beneficiary’s interest in a home would be viewed as a “change in ownership” therefore the outcome of this transaction would trigger property reassessment of that beneficiary’s inherited property share. If there are two heirs, each having inherited 50% of the property, the remaining 50% would be open to property tax reassessment. On the other hand, if there were three beneficiaries and only 1/3 of the property were retained, 2/3 beneficiary interest being bought out – 2/3 of the property would be vulnerable to property tax reassessment.

However, with the help of a trust lender funding an irrevocable trust, buying out the beneficiary or beneficiaries looking to sell off inherited shares – the fact that the trust is actually borrowing the funds to equalize distribution to the siblings that are selling out, and funding is not in fact distributed to the sibling or siblings themselves – property tax reassessment is successfully avoided.

For example, let’s examine the Anderson family in North Hollywood, who owns a home valued at $800,000, free and clear of any debt. In other words the family owns the house outright. Assessed value is $100,000. Let’s say, for the sake of argument that sibling Nina insists on selling the home, and wants a cash for her share; while another sibling, Jasper, is determined to keep the home.

(Option A) Jasper cleans out his savings account and pays out $400,000 to buy out Nina’s inherited property shares. This results in a “change of ownership” with respect to Jasper’s 50% property buyout, and the assessed outcome is a 50% property tax reassessment with a significant increase in property taxes.

(Option B) Jasper enlists the help of a trust lender, who provides a $400,000 loan to an irrevocable trust, along with getting approval to allow the trust loan to work in conjunction with Proposition 19; enabling Jasper to keep his parent’s low Proposition 13 protected property tax base. The third-party trust lender also sees to it that that funds are distributed equitably to Nina – in fact with more cash than any outside buyer would be likely, realistically, to offer – with no change in ownership, and no property reassessment; and therefore no property tax hike. The trustee at this point transfers the entire property to Jasper who plans to pay off the $400,000 loan to the irrevocable trust by cashing out a life insurance policy.

Thad Farrell, Proposition 19 / trust loan account manager (Commercial Loan Corporation at 877-756-4454) at the Commercial Loan Corp trust lending firm in Newport Beach, sums up the process as follows:

Usually siblings that want to retain inherited property from parents come to us first, generally after being referred to us by a law firm. Middle class families that can’t afford to pay reassessed taxes on an inherited home… Which pretty much sums up most families these days! Siblings inheriting a home have two options. They can sell or keep their inherited property. In other words, your family has to make up their mind – what they want to do, sell or keep. Selling it is far more expensive. By keeping the home, each beneficiary looking to sell out receives approximately $15,000 extra in a cash trust distribution when compared to selling the home to a regular buyer; because they avoid costly realtor and real estate sale expenses. A realtor typically charges 6%, there can be costs to prepare the home for sale and closing costs such as title, escrow or assistance with buyer closing costs on top of that… Each beneficiary keeping the inherited home winds up saving on average $6,200 (each) in yearly property taxes. So do the math, for starters. Whereas, if the property is reassessed – the cost can be very high.

At the end of the day, there are positive emotional outcomes from this process as well as financial savings and extra funds… However the key result is the fact that when everyone walks away from using a trust loan to take advantage of the proposition 19 parent to child property tax transfer, they all understand that they have just completed a win-win transaction… In other words, unlike most business transactions where there is often a winner and a loser – in this scenario everybody wins and no one loses.

 

Proposition 13 and Proposition 19 in CA 2021 ~ Q & A

Property Tax Information

Inheriting A Home From A Parent in a Trust or Probate

In June of 2021, we looked into the well known California estate law firm Cunningham Legal, who specializes in Estate Planning, Trust Administration, Asset Protection and Advanced Tax Planning — to see how they interpret and answer questions regarding property tax relief benefits in California in 2021, in a Q & A format. 

As the firm points out, were it not for Proposition 13, and now Proposition 19, in terms of protecting your property from reassessment, all properties in California would be immediately reassessed at full current market value when a change of ownership occurs either by death, gift, or sale.  When a property is “transferred,” or what the California State Board of Equalization calls a “change in ownership.” Which is why the parent-to-child exclusion is so crucial, with respect to protecting your property from reassessment.

Question: How does Proposition 13 affect the amount of property taxes California property owners have to pay every year?

Answer: Proposition 13, an amendment to the California Constitution which passed overwhelmingly in 1978, rolled back residential property taxes on a principal residence to 1975 levels, capping them at 1% of assessed value (plus some local additions by county). Assessments were allowed to rise at a maximum of 2% a year — even though real estate prices in California continued to skyrocket.

Question: How can heirs inheriting property from a parent still claim a limited exclusion from reassessments under Proposition 19?

Answer: If you don’t take pre-emptive action, such as establishing a Family Property LLC, then whether you give your child a home or they inherit it you must apply Proposition 19 rules and regulations to a principal residence, unless it is a farm.

Question: What Prop 19 regulations are now in effect for new homeowners inheriting a home from a parent?

Answer: The child of a parent leaving property must move into a transferred or inherited home (or family farm) as their principal residence within one year. Assuming the child does occupy the home — if the value is less than the factored base year value plus one million dollars (indexed for inflation), the base year value will not change.

Question: Who can take advantage of a limited exclusion from property reassessment under Proposition 19 inherited property transfers, moving a low property tax base over to a new home?

Answer: If you’re over 55, protecting your property from reassessment has actually gotten easier… You can now do this three times during their life instead of just once. Other eligible people include those with severe disabilities as well as victims of natural disasters and wildfires.

Question: What happens with multiple children under Prop 19? Must all the children move into the home as their principal residence?

Answer: This still remains to be seen…The California courts are still determining how a lot of details will be handled under Prop 19.

Question: Do you have to occupy an inherited house forever? How long must you live there as your principal residence before a reassessment is triggered?

Answer: Again, we don’t yet know, and further guidance is needed from the CA Legislature.

Question: Does this mean that all properties, principal residences or otherwise, are subject to possible reassessment when ownership is transferred by inheritance or otherwise, so the math can be done on new property taxes?

Answer: Probably yes. This will greatly increase the workload on assessment offices, and possibly create a significant backlog in cases.

This is why law firms such as Cunningham Legal are not simply waiting for answers from the California Courts and the Legislature. Estate law firms like this are proactively building programs to aid in  protecting your property from reassessment — such as their Family Property LLC to help middle class families save on property taxes. Lawyers like Rachelle Lee-Warner, Esq., Partner at Cunningham Legal, are always closely watching legal and legislative opinions to devise the best possible outcomes for their clients.

According to Cunningham Legal, these days even regular middle class families in California need an attorney to guide them regarding inherited property, to make sure Proposition 19 and Proposition 13 are being taken advantage of correctly; to avoid common errors.  The firm stresses the avoidance of common mistakes with grave consequences…

Question: What are some examples of mistakes people make with Prop 13 when it comes to the title of inherited property?

Answer: If you change the title of a house, you are possibly triggering property tax reassessment.

Question: What is a big mistake people make when they leave property in a Living Trust?

Answer: You name multiple beneficiaries in a Living Trust, which includes your house. Some of the beneficiaries are your children and some are not. As a result, the possibility of your children avoiding a reassessment may be lost.

Question:  Are forms a potential area for mistakes?

Answer: Certainly.  For example, you move your industrial property into an LLC so you can protect yourself while renting it out, accidentally triggering a reassessment because you didn’t file the right form on time.  This is precisely why a good attorney is so important, to protect your properties from reassessment.

Question: What paperwork mistake can parents make with respect to leaving property to their children?

Answer: They do not consider creating a Family Property LLC to protect your properties from reassessment when you die.

Question: What else would be a common paperwork error?

Answer: Your heirs simply don’t know they have to file a claim for reassessment exclusion under Proposition 13 within three years, or they may lose it.

Question: What is another common mistake many beneficiaries  make after inheriting a home from a parent?

Answer: Many beneficiaries do not realize that under Prop 19 they must reside in your primary home to claim an exclusion after your death, never establishing clear residency.

Question: Are there other frequent mistakes people make after inheriting property, with a home transferring from parent to child?

Answer: A transfer occurs without proper registration with the state—and 20 years later, the new owner owes 20 years of “supplemental” back taxes at an enormously higher rate. 

Question: What is a common error often made by parents leaving property to children?

Answer: People think that they are passing on a “principal residence” but they haven’t lived there for years, and the state objects.

Question: What about avoiding fair market rates on the transfer of a residential multi-unit property?

Answer: People think they can pass on the parent-to-child exclusion for a multi-unit property, but they only occupy part of it, and the state objects. There are no simple solutions. That’s why folks involved in any of these issues require legal support.  They need a good lawyer!

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Families and individual property owners can set an appointment for Estate Planning, Trust Administration, Asset Protection, or Advanced Tax Planning by calling their office at 1-866-988-3956. You can also contact Rachelle Lee-Warner, Esq., Partner at Cunningham Legal; Office: (805) 342-0970 Web: http://www.cunninghamlegal.com


 

Can an Irrevocable Trust Get A Loan?

Can An Irrevocable Trust Get A Loan

Can An Irrevocable Trust Get A Loan?

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

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

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

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

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

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

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

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

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

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

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

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

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

Helpful Advisors During a Property Tax Transfer on an Inherited Home

California Property Tax Transfer

California Property Tax Transfer

Transferring A California Property Tax Base On An Inherited Home

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

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

Number One Strategy: Avoid Making Mistakes!

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

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

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

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

Proposition 19 and Revisions to California Property Tax Relief

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

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

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

Lowering or Pausing CA Property Taxes to Combat Effects of the Pandemic

California Property Taxes

California Property Taxes

Removing certain taxes is something the CA Legislature can control to lessen the current financial strain on middle class  Californians. Income taxes and sales tax pose greater political obstacles at the revision stage, and payroll taxes fund Medicare and Social Security to a large extent – therefore California would do well to look carefully at decreasing or putting property taxes on hold, until the pandemic lifts and normalcy has returned to some degree.

The California Legislature proposing tax deferments for a few months will not help the state if thousands of homeowners are about to be foreclosed on and evicted – hence paying no property taxes thereafter; as an example of non-taxation that the government will survive without for a year or two.  Putting property taxes on hold  would not trouble California in any meaningful way.

Certainly, lowering or removing property taxes is a logical solution for property owners who are in trouble all over the state. Insisting on all property taxes being paid no matter what is a poor answer right now, as long as the Covid crisis continues causing shutdowns, mass unemployment, widespread under-employment, and unprecedented health issues.

If pausing property taxes is not a realistic possibility, then the state government would be wise to spend more time and energy educating the public on property tax breaks that are available to them, such as how to still take advantage of Prop 58, as well as Proposition 13 and who, as well as how, folks can make use of Proposition 19. Communications on this to educate the public in California is not nearly as robust as it could be.

Increased, easy to understand information dissemination on Proposition 13 and Proposition 58, as well as Proposition 19 and parent to child property tax transfer on an inherited home.  This would help Californians take more advantage of sibling-to-sibling CA property transfer in conjunction with Prop 19; to become more familiar with parent-child transfer rights – taking advantage of every key property tax break… establishing an exemption from paying  current, property tax rates when inheriting or transferring a primary residence, within a 12-month period.

More residents should be exposed to information about getting a trust loan, to take advantage of a sibling-to-sibling CA property transfer in concert with Proposition 19, to be able to lock in a low Proposition 13 property tax base – buying out siblings’ inherited property tax shares without issues, plus equalizing distribution, in fact for more money than an outside buyer would offer, for heirs that want to sell their inherited property shares.

. All of these decreases would help California to assist residents in spending less on taxes, if not implementing a total hold on property taxes until the pandemic is completely under control and life returns to normal in California, and throughout America as a whole.