Property Transfer in California Between Parent and Child

California Parent to Child Property Tax Transfer

California Parent to Child Property Tax Transfer

Ability to Transfer Property Taxes to Children

Let’s say you’re inheriting an aging but beautiful home from your parents, with a terrific pool, and fireplaces everywhere… with a wooden deck the family has conducted so many marvelous surf & turf barbecues on – with that brand new grill, with your favorite smoked hickory-flavored charcoal… And plenty of ice-cold drinks.

Just walking around the backyard near the grill brings back wonderful emotional family memories when you and your siblings inherited the entire property from your parents and – as your lawyers referred to it – the property was “transferred” to a new owner – in this case you…. despite the fact that your siblings are determined to sell out their property shares.  While you are determined to avoid triggering crippling property tax  reassessment!  At all costs.  So you talk to your family lawyer, and call a reliable trust lender to discuss your ability to transfer property taxes to children… Like the well known Commercial Loan Corp in Newport Beach. 

In which case a parent-to-child exclusion is secure, and makes a lot of sense – working with an irrevocable  trust loan, in conjunction with Prop  19, which has basically replaced the Proposition 58 parent-child exclusion. And simply requires a careful, but determined, step-by-step process – to reach the desired outcome – to avoid current property reassessment; while buying out property shares inherited by siblings, and nailing down sole ownership of that wonderful old inherited home with all those lovely old  dreamy family memories!

How to Avoid Triggering Property Tax Reassessment

It’s terribly important to pay attention to good advice from your attorney,   and your trust lender, on mistakes to avoid when transferring a property tax base… In most cases, your inherited property is generally reassessed by your friendly neighborhood CA County Assessors Office; while the new owner pays a higher property tax. The parent-child exclusion was voted into law on Nov 6, 1986… enabling beneficiaries to inherit property from parents, smoothly and quickly – avoiding property tax reassessment and     keeping a low property tax base when inheriting a home.

Thankfully,  new rules for property tax transfers in California  are  still  giving parents the ability to transfer property taxes to children without any issues – and enables a family/parent oriented beneficiary (usually the favorite child!) to  buyout siblings’ share of inherited property and transfer parents’ property taxes through a standard property tax transfer – getting a transfer of property between siblings accomplished without a miserable property tax hike slamming you out of the blue. 

Transferring a Family Home to Beneficiaries

As most of us know by now, given the publicity Proposition 19 has received – at the root  of all this, it’s simply a matter of inheriting property taxes at a profoundly lower rate from parents… with the ability to transfer smoothly from parent to child,  and keep parents property taxes basically forever – for that inherited family home at least. And possibly more, if you have the right lawyer, and the situation  merits it.

In other words, as estate and real property attorneys used to put it, “Avoiding property tax reassessment is why people take advantage of exclusions from tax reassessment under Proposition 58 .” And as they phrase it now, “Avoiding property tax reassessment under Proposition 19 property tax exclusions ”.  C’est la vie.

Skipping a generation, if property transfer is managed from a grandparent to a grandchild, as long as the the beneficiary’s parent is not alive, inheriting or transferring property will thankfully not increase property taxes.

For a free benefit analysis on transferring a property tax base from a parent to a child on an inherited home, you can complete the following form, in just a few minutes….

In the Shadow of Howard Jarvis – a New CA Tax Relief Hero Emerges

Stanley R . Apps – Attorney Turned Avid Tax Relief Advocate

Stanley R. Apps is an employment lawyer in California that provides legal counsel to people in the areas of Education, Civil Rights, Juvenile Defense, and Debt Collection Defense.  He represents employees who are wrongfully terminated, subjected to discrimination, or retaliated against by management.   

Mr. Apps is seasoned at fighting for rights to fair treatment and fair pay in the work place… He is experienced at handling cases involving Employment Law; Gender and Disability Discrimination, Disability Accommodations, Retaliation against Whistleblowers and those who report Discrimination.

Stanley Apps Esq. filed Ballot Initiative #21-0032 on October 6, 2021 – a property tax initiative that will allow voters to consider significant changes to California tax policy — this time for an expanded tax exemption for single-family homes paid for by higher taxes on high-valued property of all kinds. Also called The Housing Affordability and Tax Cut Act of 2022filed as a California ballot proposition, without multi-millionaire politician fanfare and media fanfare. 

Mr. Apps, discouraged and frustrated by the deceptive language and disappointing outcomes of CA Proposition 19, put forth this brand new ballot initiative to increase the existing property tax exemption for California homeowners from $7,000 to $200,000.  Moreover,  increasing non property-owning renters’ income tax credit… while establishing a surcharge on residential properties valued at $4 million or more.

Homeowner Tax Exemptions and State Property Tax Revenue

The full title reads: “Increases Homeowners’ Property Tax Exemption and Renters’ Tax Credit. Increases Taxes on High-value Properties. Limits Local Restrictions on Housing Development. Initiative Constitutional Amendment and Statute”.

If this property tax relief measure can increase part of a homeowner’s property value that’s exempt from property taxes from $7,000 to $200,000 – California homeowners will begin to see light at the end of the tunnel.  If even some of this passes, it looks like there will be positive changes in property tax exemptions as well as new rules for property tax transfers in California.

• California residents who are renters will receive an “income tax credit” up to $2,000, adjusted for inflation, as long as their income is not over $400,000 per year.

• Local governments will be reimbursed for any resulting lost revenue with a maximum property tax surcharge of 1.2% – on properties valued over $4 million.

• To pay off an expected $18B in yearly losses, many higher-end properties, valued at $5 million plus, would experience a tax hike — excluding residents of a certain age plus various lower-income properties.  However, as per usual, these items remain vague, in terms of specific details and concrete explanation. 

• Local residents with  “cash flow problems”  will supposedly be protected from being denied “lower cost housing” — again, devoid of factual data-points and specific determinations.  

Economic Affect

The economic imprint of The Housing Affordability and Tax Cut Act of 2022” on California is expected to be significant. Economists anticipate an increase in property taxes on properties worth $4 million and over;  at least $16B to $19B in new tax revenue to the state; plus increased state costs resulting from the increases to the homeowners’ property tax exemption and renters’ tax credit.

Article 13-A of the California Constitution

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.

What to Look For in an Estate & Trust Lender

Trust Loans in California

How to get a trust loan in California

Retaining a Low Property Tax Base in California

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

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

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

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

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

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

Essential Trust Lender Tasks

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

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

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

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

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

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

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

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

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

Qualifying for CA Property Tax Measure Proposition 19

California Prop 19 Rules for Transferring Property Taxes

California Prop 19 Rules for Transferring Property Taxes

Background and Updated Details on Proposition 19

Proposition 58 – a wildly popular, successful property tax relief measure since 1986, was a life-saver for middle class homeowners and beneficiaries inheriting property taxes from Mom & Dad; from San Jose all the way to San Francisco and beyond – and was abruptly replaced after a rushed, slightly confusing  PR campaign; with a tax measure called “Proposition 19” – revising Prop 58’s flagship tax break, the “parent-child exclusion”.

Yet Prop 19, true to it’s advertising, added invaluable property tax exemptions for homeowners age 55 and over, for folks with severe disabilities, and victims of natural disasters and forest fires. Giving qualified homeowners the ability to transfer the assessed value of their primary home to a newly purchased or newly constructed replacement “primary residence” up to three times in a lifetime.

For heirs inheriting a home from parents, the bottom line objective for families is property tax transfer – a low property tax base of course; avoiding property tax reassessment; and naturally  the right to transfer parents property taxes and keep parents property taxes, when inheriting a home and inheriting property taxes from Mom & Dad… Having access to a comfortable stress-free parent-child transfer, and a parent-to-child exclusion from having to pay extremely high current property tax rates.  Although nothing is perfect,  California’s property tax relief, as it is now,  gives a foothold to consumer and homeowner  advocates who firmly believe the folks in power should go all the way, to pause CA property taxes to combat Pandemic impact  on the local economy.

Promotion of Proposition 19, albeit slightly misleading, said it all in the title – the “Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act” – more or less replacing the constitutional amendment Proposition 58… However – still maintaining the right to take advantage of a parent-child transfer, inheriting property taxes from Mom & Dad to keep a low property tax base with a parent-to-child exclusion – homeowners are still able to use Proposition 19 in conjunction with a loan to an irrevocable trust, to buyout inherited property shares from beneficiaries, giving inheritors plenty of time, up to 12-months, to move into an inherited primary residence.

Changes to Property Tax Relief Effective 2/16/2021 and 4/1/2021 

  Replacing Proposition 58 (est. 1986) and Proposition 193 (est. 1996) – limiting parent-to-child transfers and grandparent-to-grandchild transfer exemptions (Proposition 193).

  Replacing Proposition 60 (est. 1986) and Proposition 90 (est. 1988) that allowed home transfer exemptions for seniors; and Proposition 110 (est. 1990) allowing exemptions for disabled homeowners.

To qualify for property tax relief, residents have to file a claim with their County Tax Assessor by the time stated in the local county ordinance, or inside 12-months from the date of property damage caused by a natural disaster, a flood, earthquake, whatever – whichever is later. The loss estimate has to be at least $10,000 of current or “fair market” value to qualify for this type of property tax relief. Property taxes are reassessed and adjusted according to the level of damage.

Requirements to Qualify for Proposition 19 Approval

1. Proposition 19 permits property tax decreases by allowing families inheriting real estate to avoid property tax reassessment on a family home used as a principle or primary residence.

2. Only one child (heir) after property is transferred, and both parents before property is transferred over, have to be primary residents of inherited property, with plenty of time (12-months) to move in after the transfer.

3. Proposition 19 allows the transfer of a family home or farm between parents and their offspring, or grandparents and grandkids (as long as both parents are deceased) without triggering “change in ownership” based property reassessment – which is a property tax increase everyone wants to avoid.

At least one beneficiary has to reside in a primary residence, upon the purchase or transfer of a family home between parents and their children, in order to qualify for a property tax exclusion.

It’s worth reiterating that in order to qualify, a beneficiary inheriting real estate must be eligible for the “homeowners’ exemption” or “disabled veterans’ exemption“, applied within 12-months of the transfer or purchase. A parent also has to be eligible for homeowners’ exemption or disabled veterans’ exemption within 12-months of transfer or purchase. Using a home as a primary residence. And can still apply even without one of these exemptions by simply proving the home is a primary residence.  It is important to point out that there is no requirement for a family farm to contain a home that a beneficiary has to reside in.

The Tax Assessor’s Office has a calculator to help homeowners estimate their potential property tax savings from a tax exclusion.  

To Qualify for an Exclusion the sccassessor.org Website States:

The value limit is equal to the home’s taxable value at time of transfer plus $1 million. Any amount of market value exceeding the limit is added to the taxable value for the transferee. Partial relief is granted under the parent child exclusion up to the value limit; with the remainder assessed at market value.

A $1 million allowance will be adjusted annually beginning in 2023.The principal claimant or the claimant’s spouse who resides with the claimant must be at least 55 years of age at the time the original residence is sold. The claimant must be an owner on record of both the original and replacement residences.

Claims must be filed within three years from the date the replacement residence is purchased or newly constructed to receive full relief. Claims filed after the three-year time period will receive Prospective Relief only. Heirs must complete the claim form and meet the exemptions requirement within the first year following the date of transfer.

The exclusion for transfers between grandparents and grandchildren are the same rules as described above except in order to qualify the parents of the grandchild must be deceased. Special rules apply to multi-unit dwellings and mobile homes.

It’s well worth noting that all 58 California counties now have adopted, in accordance with Proposition 19 stipulations, an ordinance for disaster relief, available to owners of real property, business equipment and fixtures, orchards or other agricultural groves, and to owners of aircraft, boats, and certain manufactured homes.  It is not available to property that is not assessable, such as state licensed manufactured homes or household furnishings.

2020-21 Dramatic Changes to California Property Tax Relief

Looking back at surprising 2020—2021 efforts in California to unravel existing middle class utilized Proposition 13 – commercial and residential property tax relief measures. Propaganda from various critics of property tax relief, and sectors of the realtor community, promoted unrealistic property tax measure Proposition 15 – and the attempted removal of tax breaks allowing exclusion from current tax rates for commercial property and business property owners; including middle as well as upper middle class apt building landlords throughout California. They, and Proposition 15, failed by a surprisingly small margin. 

Had Proposition 15 not failed, a property tax hike like Prop 15 would have created a massive statewide increase in prices for all goods and services, all across California, for working families and middle class consumers.  In other words, a tidal wave of statewide inflation. 

Opponents of property tax relief still refuse to admit that higher taxes on commercial property owners and landlords would have forced all business property owners to raise rents on most merchant store tenants – companies leasing malls… on businesses renting gas stations, super markets, drug stores, liquor stores – a tax hike that  would essentially impact all merchants renting space or storefronts,  as well as umpteenth landlords with countless residential tenants and office building owners with countless business tenants.

Quite frankly, voters that bothered to read the fine print under this tax measure found the potential affects of Prop 15 to be unimaginable, hence it did not pass.  It’s unlikely that Prop 19 would have passed had voters not been confused by the heavy promotion focused on “helping elderly homeowners” and “victims of wildfires” etc… or  had voters simply not been lazy, avoiding the complicated fine print concerning inherited homes… it’s quite likely that Proposition 19 may not have been voted into law. 

That, in fact, is what Proposition 15 or any commercial property tax hike would accomplish. So critics of property tax relief should take heed! Massive statewide inflation would occur… causing businesses and merchants to struggle with flagging sales, in response to higher prices, and related issues. Business bankruptcies would increase. And layoffs would most likely rise to excessive numbers.

When so much of your profit margin is going up in smoke, in property taxes, you’re not likely to start hiring more workers. In fact, sadly, you’re more likely to lay some people off. Not to mention the companies that would begin leaving the state altogether, moving to nearby states that offer lower property taxes, are more business friendly in terms of taxation overall, certain property taxes, hence you lose workers and in fact increase unemployment and lose tax revenue from all those folks that are not working.

On the other hand, another property tax measure, Proposition 19, was voted into law in California. Looking beyond the obvious fact that this tax measure somewhat limited the former Prop 58 parent-to-child exclusion (from paying current market rates)…  the property tax transfer process, in other words the ability to transfer parents property taxes and keep parents property taxes without limitations, when inheriting property taxes, a parent to child property tax transfer… all became more limited in terms of what heirs of parents are actually  able to exclude from current tax rates. 

Basically, people now more or less have to work a little harder to be able to avoid property tax reassessment; and it unraveled a loophole which made it easy for the next generation to avoid being reassessed at current market value. Not only that, it’s no longer possible to use Proposition 13’s 2% tax cap when purchasing investment properties, often used as vacation rentals to generate some extra cash from tourists.

However, Prop 19 does make it possible for folks that are over age 55, that are residents with homes damaged or destroyed by natural disasters like floods, earthquakes or wildfires, as well as homeowners that are disabled, to receive excellent property tax breaks. Those Californians can keep their residential property basis when shifting to a new primary residence.

A lot of homeowners are encouraged by these changes to property taxation to downsize. However, many residents are looking to do this anyway, especially older middle class residents who tend to have a  fixed, modest income from Social Security and/or lower income pensions.  And there is always an exclusion from current tax rates to look to, the ever popular parent-to-child exclusion, with a full year to move in, as a primary residence, to inherited property.

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

Property Tax Transfer in California

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.

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

Property Taxes In California

Property Taxes In California

CA Proposition 19 Expanded Property Tax Breaks

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

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

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

Property Damage from California Wildfire

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

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

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

Replacement Property Transfers

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

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

Property Destruction by Natural Disasters

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

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

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

CA County Tax Assessors

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

County Tax Assessors throughout California can be located here.
 

Repealing California’s Death Tax

Repealing California's Death Tax

Since the passage of California Proposition 19, more and more families are receiving notices that the death of a parent has triggered reassessment of a family property and sharply increased their property tax bill. In an attempt to stem this, the Howard Jarvis Taxpayers Association has filed a ballot initiative with the Attorney General’s office to repeal California’s Death Tax.

In November of 2020, many voters were unaware that California Proposition 19 included a provision that affected inter-generational transfers of homes. Prior to California Proposition 19’s passage, a parent could transfer a home of any value plus up to $1 million of assessed value of other property to their children, without reassessment to market value. However, effective February 16, 2021, this is no longer the case.

The Howard Jarvis Taxpayers Association is fighting to modify Prop 19 and restore the ability of parents to pass property to their children without any change to their tax bill. Commercial Loan Corporation is working with them to gather the signatures required to get it on the ballot. The new initiative is titled the Repeal the Death Tax Act. It would reverse the Proposition 19 changes to the rules affecting inter-generational transfers. To further protect California families, the measure includes an inflation adjustment for properties in addition to the primary residence. Up to $2.4 million of assessed value would be excluded from reassessment upon transfer, offering significant tax benefits to families that own small business properties or rental units for income. A primary residence of any value would be excluded from reassessment.

If you are interested in helping collect signatures and think that you can collect several, you can have a petition mailed to you along with complete instructions on how to do so. The deadline to collect the necessary signatures is April 29, 2022 so the time to act is now to repeal California’s Death Tax!

You can request a petition online here, or call Commercial Loan Corporation at 877-464-1066 for more details.

Transferring Low Property Taxes to Heirs & Replacement Homes

California Property Taxes

California Property Taxes

For Californians that are still confused by  complex tax breaks, or changes to property tax relief measures such as the right to buyout siblings’ share of inherited property – a high-level summary, boiled down to its’ essential key elements, might help…

Expansion of Property Tax Base Transfers

There have been unexpected limitations to former Proposition 58 tax breaks (now under Proposition 19) such as the parent-child transfer, or parent-to-child exclusion from paying current property tax rates, for beneficiaries inheriting their parents’ home, property tax transfer, the right to transfer parents property taxes and keep parents property taxes, when inheriting property, hence inheriting property taxes, to keep parents property taxes, or the right to buyout  siblings’ share of inherited property with a loan to an irrevocable trust in conjunction with Prop 19.

Some limitations now exist where there were none previously, however these benefits are all still intact as genuine property tax relief for beneficiaries inheriting a home from parents, or homeowners transferring a low property tax base from an old home to a new replacement home.  

Surprisingly progressive property tax relief measures  provided by Proposition 19 allow homeowners who are over 55 years of age, or disabled, or victims of a wildfire or natural disasters such as an earthquake or flood… to transfer the lower assessed property value of their original primary home – to a recently purchased or recently built primary replacement residence. Up to three times (or once per disaster).

And, increased from the previous property tax measure which limited portability only to certain approved counties, ones’ tax base may be transferred to a property located anywhere in the state.  Besides being able to transfer the taxable value of their existing primary residence to a new replacement primary residence of any value, anywhere across all 58 counties in the state of California. The exclusion can be filed up to three times by property owners over age 55, or severely disabled.

However. The opportunity to use a natural disaster such as an earthquake or flood, or wildfire, for the same tax break turns out to be a rather dubious benefit for eligible homeowners.  Because  it’s highly unlikely that one family or single homeowner will be hit by a natural disaster or wildfire more than once, even though severe damage from a forest fire or wildfire could very easily occur, residing in Southern California.

Although, when getting on in years, or being disabled, knowing you can transfer your low property tax base three times is a nice benefit to have in your back pocket, knowing you can use it if you need to. It’s just not a terribly realistic tax break, that’s all.

Prop 19 dramatically changed two property tax measures, administered by County Tax Assessors for years:

a) Parent-Child Transfers & Grandparent-Grandchild Property Transfers, effective February 16, 2021;

b) Senior Citizen and Disaster Relief Tax Base Property Transfers, effective April 1, 2021.

Parent/Child Transfers & Grandparent/Grandchild Transfers

Under Proposition 19,  to inherit a lower property assessment from parent(s) or grandparent(s), these requirements have to be completed:  

a) An inherited Property must be the primary residence of parents or grandparents

b) Inherited property must become the primary residence of the child or grandchild heir inside 12-months

c) Only the principal residence of a parent(s) or grandparent(s) qualifies for a base year value transfer. Other property, residential or commercial no longer qualify for this benefit. This provision applies to transfers starting Feb. 16, 2021

Parent-child transfer & grandparent-grandchild transfer forms

Property Transfer Tax Assessments

Proposition 19 expanded and revised rules for tax assessment transfers in California.  Eligible homeowners used to be able to transfer their tax assessments to a different home of the same or lesser market value, which allowed them to move without paying higher taxes.

Homeowners who were eligible for tax assessment transfers are persons over 55 years old, persons with severe disabilities, and victims of natural disasters and hazardous waste contamination.  Any homeowner of any age can buyout siblings’ share of inherited property through a trust loan, in conjunction with Proposition19, in California.

New property tax measures allow eligible homeowners to transfer their tax assessments to a home anywhere  in the state and allow tax assessments to be transferred to a more expensive home  bearing in mind an upward adjustment. The number of times that a tax assessment can be transferred increased from one to three times for homeowners age 55 and over, or with severe disabilities.  

These new tax breaks will impact farms as of Feb 16, 2023, the $1,000,000 amount will be adjusted each year at a rate equal to the change in the California House Price Index.

CA Property Tax Revenue

Proposition 19 introduced the California Fire Response Fund and County Revenue Protection Fund. The CA Director of Finance has to add up extra revenue and savings from the new property tax law. The State Controller has to fund the Fire Response Fund with 75% of the determined revenue, with 15% going to the County Revenue Protection Fund.

The County Revenue Protection Fund is supposedly going to be used to reimburse counties for losses in revenue associated with  changes to property taxes. The Fire Response Fund is to be used for full-time fire station staff.

Property Tax Base Transfers for Homeowners Over 55

One other component under Proposition 19 allows homeowners who are over 55 years of age, disabled, or victims of a wildfire or natural disaster, to transfer the lower assessed property value of their primary home to a newly purchased or newly constructed replacement principal residence up to three times (or once per disaster). The tax base may be transferred to a property located anywhere in the state.