How Has Prop 19 Changed Inheriting California Property and Home Ownership?

How Has Prop 19 Changed Inheriting California Property and Home Ownership?

How Has Prop 19 Changed Inheriting California Property and Home Ownership?

Proposition 19’s supporters would like to reduce Prop 13’s less attractive elements and implement what they would call, “freeing-up long-term homeowners.” 

Prop 19 is expected to generate increased house sales, as well as realtor and broker commissions, which is why Prop 19’s largest supporter, the California Realtors Association spent $40,400,341 to get Prop 19 passed, and the National Association of Realtors kicked in $4,800,000 to promote such a hard-to-sell property tax measure.  The $100,000 donated by the California Professional Firefighters union to Proposition 19 pales in comparison.

Proposition 13, which passed in a landslide way back in 1978, was a unique amendment to the California Constitution which capped residential property taxes on a primary residence to 1970s levels, capping them at 1% of assessed value (plus local additions, by county).  Assessments were allowed to rise at a maximum rate of 2% per year — even though prices on real estate in California continued to increase in most of the state’s 58 counties.

Properties would be reassessed at current market rates when a total change of ownership occurred, either by death, gift, or sale — when the property in question is “transferred”.  What the CA State Board of Equalization calls a “change in ownership.”  Deceptively simple terminology for a rather complex process; made even more complex these days by varying state taxes and Coronavirus issues, verified at property tax relief websites and niche blogs like Property Tax News or Loan To A Trust.

 Inheriting California real estate and home ownership in general is different now as far as property taxes are concerned.  If a homeowner in any county bought a $2,000,000 home today, without any property tax breaks, they might pay roughly $25,000+ per year in property taxes.  A family in a nearby $2,000,000 home that’s been there for let’s say 30 years may owe merely $2,500 per year.  But it’s all relative.  Certain politicians complain about this type of inequity… however  if you bought property 30 years ago, would the same property cost the same last week?  Of course not.  So why should taxes be any different.  

Under Proposition 19, the only low Proposition 13 tax base that can be transferred to your children is that of your principal residence to your heirs (offspring).  Subsequently,  your heirs have to reside in that home also as   their primary residence.  And if that inherited home is valued at more than $1,000,000 it may be partly or completely reassessed by the local  tax  assessor, with a partial or total loss of their Proposition 13 parent-to-child exclusion property tax break.  It is not entirely clear yet how all of this will shake out once the dust settles on this. 

However the entire concept of installing a property tax hike in the midst of a flagging Pandemic economy with growing unemployment and under-employment; or even the decision by the Legislature to  promote a Proposition 19 tax hike in 2021 — to water down middle class homeowners’ ability to avoid property tax reassessment is under a spotlight and being seriously questioned in light of basic survival, and even retirement, by respected economists, academics and analytical websites.   

In most cases, Proposition 19 will effectively eliminate a parent’s right to transfer a low property tax assessment to heirs, since it is unclear at this point how  many heirs or beneficiaries inheriting their parents’ home will be all that excited about  moving into that inherited home as a primary residence — and within 12 months at that. It may be too small for a large family.  Work places may be too far away to be convenient.  School districts could b e a major issue.  And so on. 

Moreover,  many homes are worth far more than $1,000,000 in California. That makes Proposition 19, despite it’s many positive benefits, a liability for many inheritors… with challenging  outcomes for certain taxpaying residents who have inherited California real estate.

The folks who benefit from Proposition 19 are embraced clearly in its’ promotional title: “Home Protection for Seniors, Severely Disabled and Victims of Wildfire or Natural Disasters Act.”  Exactly what the definition and application of  “severely disabled” is, remains to be seen.  As mostly everything with this particular Legislature, it would be safe to say that there are a lot more assumptions in play here than specific, concrete projections that are backed up by well researched data and factual analysis. 

We can assume that homeowners who are over the age of 55, disabled or supposedly “severely” disabled, who have been harmed by a forest fire or  some other natural disaster of some kind,  will be able to transfer the assessed value of their primary California residence to a new home anywhere within the state’s 58 counties. 

This revised property tax relief procedure may be repeated  three times in a lifetime, supposedly, and so homeowners now have two years to transfer their Prop 13 low property tax base.  And one can still expect (with more limitations now built into the process) to be able to take advantage of trust lenders with a loan to a trust if the goal is to buyout co-beneficiaries (i.e., siblings) looking to sell their inherited property shares, as a transfer of property between siblings, with a loan to an irrevocable trust. 

So no matter what, at least for the moment, Californians can still make good use of a property tax transfer from a parent, a Prop 13 low property tax base — under the CA Proposition 13 transfer of property — and transfer parents property taxes, with the sole objective to   keep parents property taxes regardless, when inheriting any kind of property more or less, and inheriting property taxes under California’s parent to child transfer, known as the  parent to child exclusion — which has been the number one target anti property tax relief parties want to  water down, or even repeal.                

Additionally,  if the homeowners’ new house is assessed at a higher value  than their previous home — their property taxes might go up, however not  as high as they would have been before Proposition 19 went into effect. So there is helpful property tax relief here if you look for it, such as being able to establish a Prop 13 low property tax base.  It is just not quite  as simple and straight-forward as it once was, before Proposition 19 more or less replaced Proposition 58 in the sunny state of California, in Nov. of 2021. 

PART TWO: California Beneficiaries Learn How to Make Prop 19 Work For Them

How California Prop 19 Works

How California Prop 19 Works

Interestingly enough, even though certain members of the press now oppose Proposition 19 as if they had been defending this position all this time – when in actual fact they had been trying to convince Californians that their Prop 58 parent to child transfer, to avoid property tax reassessment, their parent to child exclusion from being taxed at current rates, or their right to buyout a sibling’s share of their inherited property, was a negative.

When in fact they now admit that for property owners, heirs and beneficiaries inheriting property from parents – all these tax breaks are clearly a positive benefit for California residents. And in the real world, away from ideology, there is no disputing it.

So like many residents, after Proposition 19 was voted into law, the California press also found themselves experiencing “buyer’s remorse” once the dust had settled a bit and Prop 19 actually became a reality, for better or for worse.

Confusing things even more, investigative reporters at the Los Angeles Times created the “Lebowski Loophole” in 2018, named after actor Jeff Bridges. The Times reported that “Jeff Bridges, together with his brother Beau and their sister were paying only $5,700 a year in property taxes on a 4-bedroom Malibu home with access to a semi-private beach and panoramic views of the Pacific Ocean; inherited from their parents, who bought it in the 1950’s; but none of the Bridges siblings lived there.

Apparently, the Bridges family was renting out their beachfront property for $15,000 a month. This urban legend is still the only example used by the press, year after year, to support anti property tax relief arguments. They use this one example to represent a supposed army of folks doing the same thing… and yet, surprisingly, have not come up with the name of another family investing in high-end property under Proposition 13, getting off easy on taxes, and renting out their property out for huge financial gain.

In all these years, for whatever reason, the press has never come up with the name of another family as even a second example of this type of supposed “property tax abuse” showing how Proposition 13 is abused by California inheritors.

The truth is, by and large, most middle class families inheriting property are taking advantage of the parent-to-child exclusion tax break merely to survive and to be able to afford to inherit property without getting killed on the tax hit. Middle class folks that are merely trying to live with a degree of comfort and class in a hyper expensive state, where all the good things have been established with the wealthy in mind – the flashy cars, the beachfront properties, the large homes with beautiful lawns and pools, the fancy restaurants, and the red carpets… The fame and success, that everyone stops and stares at, and admires.

Still held over from Prop 58, we now have similar, albeit more limited, Proposition 19 parent-to-child exclusion benefits, for beneficiaries who want to avoid property tax reassessment; who want to keep inherited property from parents and keep parents property taxes.  They support the  transfer of property taxes when inheriting property taxes from a parent.
Property tax transfer, the ability to transfer parents property taxes, keeping property at a low base rate is top of mind for every homeowner and property inheritor in California.

Parent to child transfer – their parent to child exclusion from property reassessment is the only benefit that makes it possible to be able to establish a low Prop 13 property tax base, the same as their parents had… Plus the transfer of property between siblings, to be able to buyout co-beneficiaries who are looking to sell their inherited property shares.

In reality, this type of property tax relief, by being able to transfer parents property taxes, accomplishes exactly what is was set out to do – protect residents’ property tax rates, and give the middle class some sense of property tax stability; to have a sense of pride and security over the years.

Were it not for Prop 13, you can rest assured property taxes would be sky high by now, practically unaffordable for many; and certainly a struggle for most.

PART ONE: California Beneficiaries Learn How to Make Prop 19 Work For Them

California Beneficiaries Learn How to Make Prop 19 Work For You - Part 1

California Beneficiaries Learn How to Make Prop 19 Work For You – Part 1

Representatives of the 2021 California Legislature don’t talk very much about Californians who are on the losing side of Proposition 19. They admit to “sweeping changes” in a generic sense, but rarely how those sweeping changes affect middle class people, not multi-millionaires, in specific actionable ways, such as unique property tax benefits thanks to Proposition 13… avoiding property tax reassessment, much to the benefit of regular working families’ bank accounts

We’re not talking about millionaires or billionaires here, we’re talking about middle class, working families who want their children or grandchildren to be able to inherit their home and be able to take advantage of a low Prop 13 tax base. It is as simple as that.

To take advantage of Proposition 19 or Proposition 58 to avoid property tax reassessment, heirs or  beneficiaries must move into an inherited home as a primary residence, within 12 months after the surviving parent passes away. Thereby avoiding property tax reassessment, as long as the offspring don’t decide to use this inherited property as an investment property… for vacation or rental purposes.   It sounds complicated, but it’s not.

For example, take a house in Santa Barbara bought by your parents in 1975 for $100,000.  By now, it’s valued at $2,000,000, yet the assessed value under Proposition 13 is $200,000. Therefore, your parents pay approximately $2,500 a year in property taxes, after local property tax assessments. Proposition 13, thankfully still hanging in there, allows for an unlimited parent-to-child exclusion, or “principal residence exclusion” as attorneys would call it; permitting offspring to inherit this home plus the $200,000 assessed value and the low $2,500 yearly tax hit. The 2% annual cap protects your property taxes so they can go up only $50 roughly per year.

Prop 19 caps the “principal residence” parent-to-child exclusion is now, since Feb 16, 2021, capped by Proposition 19 at $1,000,000 meaning, if we’re using our example of a $2,000,000 house in Santa Barbara (an admittedly modest home for Santa Barbara)… the additional $1 million in value will result in property taxes of $10,000 plus per year. 

Paying taxes only on 50% of your home’s value does sound like a great way to save on property taxes. However, it this can also be a negative for numerous working families… as there are also other costs, for instance maintenance, utilities, water, air conditioning and/or heat, unexpected repairs, certainly there is insurance and frequently a mortgage.

Factoring all this together, if you inherit a home and decide not to move in as a primary residence – your property taxes will go up abruptly and significantly! Regrettably, your lovely new inherited home will be reassessed at the full market value of $2 million, resulting in an annual tax bill of over $25,000! Not an attractive outcome for a middle class homeowner.

The Los Angeles Times characterized Proposition 19 as a tax law that: “…would just expand the inequities in California’s property tax system.” They claim it is a “…cynical and unwelcomed melding of good and bad tax proposals”.

The San Francisco Chronicle wrote: “It’s still a flawed package, designed to rev up home sales that benefit real estate agents who could reap more in commissions.”

And Mercury News wrote: “Prop. 19 merely plugs one hole in the state’s porous property tax laws while creating another. It’s time for holistic reform that simplifies the system and makes it more equitable…”

And yet, ironically, many of the same California newspaper editors that now vehemently appose Proposition 19 had formerly been printing articles and editorials that repeatedly indicated that limiting the ability to keep parents property taxes in California or “…limiting or ending the Proposition 58 parent-to-child exclusion was a good thing for California”. 

Oddly enough, these Editorials and Op-Eds were trying to convince CA homeowners that the Proposition 13 enabled process of transferring property taxes, and obtaining a parent to child property tax transfer was not — as the entire state of California has thought since 1978 — actually beneficial to homeowners and beneficiaries inheriting property from parents.

– the ability to transfer parents property taxes and keep parents property taxes in California when inheriting property taxes, were not positive property tax benefits for beneficiaries or homeowners.  Even though now, their official opinion is quite the opposite.

 

How Will Proposition 19 Impact Middle Class Families in California?

How Will Proposition 19 Impact Middle Class Families in California

How Will Proposition 19 Impact Families in California

Before Proposition 19 existed, parents in California could transfer their primary residence and $1,000,000 per parent of other property to their children without triggering a tax reassessment of  those properties. After Feb. 15, 2021 that exemption, the parent-child exclusion,  was watered down, limiting access to this time-honored exclusion from current property tax rates to moving into an inherited home only as a primary residence;  and limiting a beneficiary’s ability to go about avoiding property tax reassessment in CA to a strict 12-month move-in period. 

As long as this deadline is kept, heirs will be avoiding property tax reassessment in CA without issue.  An heir’s ability to transfer parents property taxes when inheriting property taxes, and the right to keep parents property taxes on any property tax transfer from a parent, as Proposition 19 parent to child transfer, or Prop 19 parent to child exclusion, is guaranteed.  As is the right for a beneficiary to get a trust loan from a trust lender to implement a  transfer of property between siblings… In other words, you can lock in a low Prop 13 property tax base plus buyout co- beneficiaries if they want to sell their inherited property.  Amen!  And in the midst of the Coronavirus crisis, with rampant unemployment and under-employment… a 6-figure trust loan could be a life-saver.

After Feb. 16, a transfer of a principal residence by a parent to a child (heir) is only exempt if the parent was using the property as their principal, or primary, residence; and the heir is also residing in the inherited home as a primary, principal residence following the parental property transfer.  If that is not a problem, we’ll most likely see an equivalent number of middle class and blue collar families avoiding property tax reassessment in CA as before Prop 19 became law. 

Even if only half as many people as before take advantage of the Prop 19 parent-child exclusion, 50% is still a pretty healthy number.  No other transfers of property between parents and children will be exempt from reassessment, with the exception of a family farm, which is currently defined but as “farmed land” whether the property includes a residence or not. 

Transfers that are excluded from property tax reassessment do have limitations, however.  The exclusion applies only as far as the assessed value at the time of transfer plus $1,000,000. Any property beyond that value would be reassessed at a current market tax value.

Housingwire.com recently wrote: “Prop 19 will deliver needed funding for cities, counties, and school districts when they need it most. It will generate hundreds of millions in annual revenue for fire protection, affordable housing, homeless programs, safe drinking water, and other local services and dedicated revenue for fire districts in rural and urban communities to fix inequities that threaten life-saving response times to wildfires and medical emergencies.”

So how will Proposition 19 impact the middle class, working family  housing market in California, admittedly an expensive state to live in.  Although certain components in California will benefit from a new property tax revenue stream, regular middle class and blue collar families residing in inherited homes may still find it difficult keeping up with the rising costs and expensive lifestyle of California. Yet Prop 58 can still help. Proposition 58 Property Tax Breaks are still in place, despite restrictions.  Providing you intend to occupy an inherited home as your primary residence you can still save as much as $10,000 annually in property tax savings.  

President of One80Reality, Nick Solis, tells us:  ““We are definitely  going to see property taxes rise on inherited homes. California is one of those places where blue collar workers usually pass down homes to kids and other family members. Those homes are now going to be taxed at a much higher rate. It will force their hands to sell, because the properties will be more expensive to retain.”

Mr. Solis said he’s not worried about selling homes, but a new demographic of home buyers is going to emerge. He tells us: “Not     all who receive inherited homes come from money. Many blue collar workers and families bought in previous decades when homes were affordable, and are passing them down to their kids. They will see a tax increase. We’re going to see a different demographic. We were already seeing a major push of middle class and blue collar people,  that could afford a home in places like the Bay area, now moving into the central valley or other more affordable places because they just feel too uncomfortable living in their current homes. And now taxes are going to be even higher on inherited homes.”

A well known California realtor, who preferred to remain anonymous,  recently claimed: “With higher property taxes, keeping inherited homes as rental properties may become unprofitable, estate-planning attorneys are going to be very busy, as this new law may cause many people to decide to sell properties that they intended to pass on to their heirs.” 

Millennials and other younger generations will be impacted as well, avoiding property tax reassessment in CA People in their early twenties might decide to leave California, with no plan to ever return.  This is quite different than recent years, where the state was attracting a lot of young starter-home buyers. The same young adults are now looking carefully for more affordable homes, after graduating from college – even if that means leaving the state completely, with a new job; and perhaps a new family.

Another seasoned California realtor told us, on condition of remaining anonymous:  “It’s a real game-changer.  Both in terms of California properties being sold that would have been passed on through a family trust, or by the beneficiaries who decide they either can’t afford to pay property taxes based on a current assessed value, or just don’t want to pay the higher property taxes. The state’s going to make a lot of money.”

Higher property taxes or not, California will always be an attractive place to live. There is sunshine 12 months per year, an ocean nearby, convenient cities and yet rural areas 30 minutes away… “People are always going to want to live in California, but I can see life getting more expensive here a lot faster than I expected,” Mr. Solis added.

Working With An Irrevocable Trust Lender

Irrevocable Trust Lenders

Irrevocable Trust Lenders

First, let’s go back over the key elements involved in the most popular trust loan beneficiary-conflict solution available in California.  It’s worth mentioning that California is still the only state in America where you can avoid property tax reassessment at current rates; capped at 2% taxation basically as long as you own property inherited from parents… thanks to 1978 CA Proposition 13. 

And this is where we get into trust liquidity – something a lot of folks in California don’t really understand. California business property and residential property owners, in addition to having the right to keep parents property taxes, and transfer parents property taxes upon inheriting property, and then inheriting property taxes at the low Proposition 13 two-percent tax rate maximum – can maintain a low property tax transfer rate basically forever, through a parent to child transfer, or “parent to child exclusion”, as long as all tax relief requirements have been met, usually with the assistance of an experienced irrevocable trust lender.  

Additionally, Californians even have the right to apply for the same tax break on a secondary property inherited from parents.  Approval is a formality only. No only that, as a California property owner you can buyout as many siblings as you like; that is to say, as many co-beneficiaries as there are who wish to sell their inherited property shares – as long as you are approved for the appropriate amount of funding to a trust loan, from your trust lender… And as long as the co-beneficiaries are fully committed to selling out through a trust loan, rather than accepting less money from a third-party outside buyer – while you keep the same inherited property from your parents, financed through the trust loan, avoiding property tax reassessment for that point on, establishing and maintaining a low Proposition 13 property tax base.

Elements that drive this process are worth researching, to understand the subject better and simply to be able to work more effectively with a trust lender… Many of these process elements are covered in detail on the California State Board of Equalization website, focusing on various relevant components within Proposition 58 among others.  Or you can research heavily detailed business sites such as Commercial Loan Corp, the brainchild of forward-thinking CEO Kerry Smith;  or info-blogs such as Medium.com,  or perhaps  the Trust and Estate Loans micro-site; or the Property Tax News blog…  Trust loans working in accord with Proposition 19 make it possible for heirs and beneficiaries to sell their shares of inherited property, a co-beneficiary buyout of sibling property shares – as realtors put it, “the transfer of property between siblings”, and “lending money to an irrevocable trust“ – typically from an irrevocable trust loan lender.

Commercial Loan Corporation in Newport Beach, CA appears to be the “favorite flavor” of the decade, where trust lenders are concerned, as they specialize in taking full advantage of all Proposition 19 property tax relief benefits for clients; helping beneficiary siblings avoid property tax reassessment, while making sure they transfer parents property taxes correctly, when inheriting property taxes from parents, a business facility, home and/or land; abruptly inheriting property taxes that have to remain low, simply to free up some needed cash; in order to keep up a reasonable lifestyle, what with the cost of living in California these days.  

You also want to be careful, to work with a trust lender that has a great deal of experience with this process… To make sure that beneficiaries and  property owners take full advantage of the right to keep parents property taxes, with a low Proposition 13 tax base.  No other state in America even comes close to providing this sort of property tax relief. And property taxes in this country, for the most part, are high for a middle class and working class families. No other state gives residents the ability to use a CA Proposition 58 or California Prop 13 type of property tax transfer, with parent to child transfer, or as lawyers like to call it, “parent to child exclusion”.

The fact is, we need to know how to work with a professional trust lender to be able to use tax breaks as efficiently as possible, that as Californians we are fortunate enough to have access to.  Moreover, every property owner in every state should know how to work with an irrevocable trust lender to buy out a beneficiary’s share of inherited property; and basically understand how a sibling-to-sibling property transfer or co-beneficiary buyout of sibling property works in California.

Bottom line, every state in this country should have trust lenders to work with  to take advantage of residential and commercial property tax relief solutions similar to Californian property tax breaks such as CA Proposition 13, and now Proposition 19 – enabling property owners to keep parents property taxes, at a low 2% capped tax base from Prop 13… along with property tax transfer benefits still in effect from CA Proposition 58; enabling the transfer of property between siblings, or, more specifically, allowing a co-beneficiary buyout of sibling property, paying them cash to not sell out, while you get to keep your parent’s house and/or land at that super low Proposition 13 protected tax base.

If you are in need of a loan to an irrevocable trust, please completed this form and we will have a representative from Commercial Loan Corporation contact you; or you may call them at 877-464-1066:

What Will CA Prop 19 Accomplish for Families Looking For a Low Property Tax Base?

California Prop 19 Info

California Prop 19 Info

The pro-Proposition 19 members of the realtor community in all 58 counties throughout California are openly enthusiastic about Proposition 19, more or less  due to an anticipated increase in property sales, accelerated broker commissions and increased property tax revenue.

Other political, partisan professionals believe in the new tax measure as well, such as Jim Brulte, California Republican Party former chair, who stated, “Proposition 19 protects tax savings and other benefits for vulnerable Californians including seniors, disabled homeowners, and wildfire victims.  State and local Democrats should close unfair loopholes, and provide needed housing!”  Alexandra Rooker, former chair of the California Democratic Party said, “Proposition 19 protects seniors and working families…”

Yet, some others do not see it that way. Why?

Jon Coupal, President of the Howard Jarvis Taxpayers Association wrote in a recent editorial: “Proposition 19 is an attempt by Sacramento politicians to raise property taxes by removing two voter-approved taxpayer protections from the State Constitution. This Prop 19 measure would, all too frequently, require reassessment to market value of property transferred from parents to children, and grandparents to grandchildren.”

Sara Kimberlin and Kayla Kitson at CalBudgetCenter.org, the non partisan California Budget & Policy Center that focuses on public policy news and analysis and the effect of these policies on middle class and working California families – are among the unconvinced.  Ms. Kimberlin and Ms. Kitson tell us emphatically, in direct contrast to the statements from Mr. Brulte and Ms. Rooker: “Proposition 19 does little to help California’s housing affordability crisis! It has created a complicated property tax scheme, and reinforces racial inequities in California.”

As one of the most complicated, confusing measures on the November 2020 state ballot, Proposition 19 did genuinely seem to promise large improvements for seniors, homeowners with “severe disabilities” (which is almost impossible to define), the firefighter’s union, and other related parties. A sure sentimental winner when it comes to pulling the heart-strings of Californians.

Yet the closer you looked (which few bothered to do prior to the vote in November 2020) the more significant the changes to California’s residential property tax system you saw… Some helpful to regular middle class homeowners, folks with disabilities, and seniors… Some not so helpful. In the past, you would want to keep parents property taxes through parent to child transfer. As well as locking in a low property tax base while buying out siblings’ inherited property through Proposition 58 and a trust loan. Now it’s through Proposition 19… and there are limitations. and there are l

If you are inheriting CA property taxes from a parent, hoping to keep your parent’s home, that they left to you, as well as keeping their low Proposition 13 tax base – and your attorney is recommending a 3rd party loan to make all this happen, while buying out co-beneficiaries that are looking to sell off their inherited property shares – it would make a lot of sense to call an established trust lender to get advice and possibly a large irrevocable trust loan.  You want to look into California lenders who will lend directly to an irrevocable trust or probate estate. You also want to make sure you understand all about inheriting CA property taxes from a parent, as well as how to transfer parents property taxes when Inheriting property taxes from a parent.  You want to make sure, regardless, what it takes to keep parents property taxes on any property tax transfer, with a parent to child transfer… and parent to child exclusion from having to pay egregious, current property tax rates! 

In actual fact, it looks like Proposition 19 will most likely expand a property tax loophole for older wealthier homeowners, while covering the cost by narrowing the parent to child exclusion, or exemption, for beneficiaries of inherited properties – but, and here’s  the problem, also requiring state and local governments to create new systems capable of tracking how much new property tax revenue is coming in as a result, with a far more sophisticated, robust administrative infrastructure; significantly increasing overhead costs of existing administrative local governments.

They expect Prop 19 will bring in additional hundreds of millions (economists insist it’s nowhere near the billion-plus the California Legislature is anticipating).  And yet this new admin system will call for a great deal more in administrative costs to manage, hire, create software and train staff for this new tax system than anyone is realistically projecting at this point… as well as re-allocating the supposed additional hundreds of millions due to Proposition 19, as a final step. 

VoterGuide.sos.ca.gov tells us Proposition 19 is likely to result in increased state and local revenues – but not for every county. They tell us while most of the new Proposition 19 property tax revenue willhat-does-ca-proposition-19-accomplish be restricted to a new fund limited to supporting fire response, Prop 19 also limits taxes on seniors, “severely disabled” homeowners, and wild fire of forest fire victims.  Tax analysts and assessors refer to these people as “eligible homeowners.”

An eligible homeowner can move within the same county and keep paying the same amount of property taxes if their new home is not more expensive than their existing home. Also, certain counties allow these rules to apply when an eligible homeowner moves to their county from another county.  So, despite the positive benefits, implementing Prop 198 will not be as simple and as easy as it’s supporters  claim it will be.

The California Proposition 19 Newspaper Debate

California Proposition 19

California Proposition 19


The official California  “Voter Guide” (Official Voter Information Guide) tells us CA Proposition 19 actually protects Proposition 13 property tax savings; and “closes unfair tax loopholes used by wealthy out-of-state investors” — a subtle reference to East Coast investors, of which in reality there are relatively few families like this actually coming to California to inherit property from parents, under Proposition 13, and rent out to wealthy tourists. 

This exaggerated claim has already been dis-proven, yet folks that support Prop 19  and continuously question property tax relief and Proposition 13, continue to repeat this false claim in the media — even though most CA property owners back Prop 13 and Proposition 58.

Newspapers have weighed in recently on Proposition 19: in terms of support…  

• San Mateo Daily Journal: “This would enable people in high cost areas to move more easily, opening up room for new residents to the area.”

• The San Diego Union-Tribune: “While critics see this as a gift to the wealthy elderly, the great majority of older homeowners are middle-income, not rich. Allowing them (as well as disabled homeowners and wildfire or disaster victims) to downsize without suffering a huge property tax hit is a humane policy that helps people retire with much less financial stress. It would also promote fluidity in home sales, increasing the availability of larger homes for families with children and easing the phenomenon of Proposition 13 depressing the real estate free market by trapping empty-nesters in homes bigger than they need.”

And in opposition…

• Tahoe Daily Tribune: “It’s no secret that ballot initiatives can be confusing, but Proposition 19 takes obfuscation to a whole new level.  Voters can’t be blamed if they can’t remember whether Prop. 19 is the initiative that is a massive property tax hike or the measure that actually has something good for homeowners or the initiative that has something to do with firefighting. The fact is, all three are at least somewhat true — especially the part about the big tax increase.”

• Mercury News & East Bay Times Editorial Boards: “Prop. 19 merely plugs one hole in the state’s porous property tax laws while creating another. It’s time for holistic reform that simplifies the system and makes it more equitable. This isn’t it. The longer a person had owned their current home, and already benefited from inordinately low tax bills due to Prop. 13, the greater the tax break on the new property. And those who downsize would often be competing with first-time buyers for more-affordable smaller homes. The real reform would be to abolish the tax-transfer program, not expand it.”

• The Bakersfield Californian Editorial Board: “Proposition 19 is another do-over on the ballot. Two years ago, the real estate industry spent $13 million on a similar initiative campaign to expand the program statewide and enhance the benefit for eligible homeowners. Sixty percent of voters rejected the initiative.”

• Los Angeles Times Editorial Board: “But Proposition 19 would just expand the inequities in California’s property tax system. It would grossly benefit those who were lucky enough to buy a home years ago and hold onto it as values skyrocketed. It would give them a huge tax break and greater buying power in an already expensive real estate market. It would skew tax breaks further away from people who don’t own a home or who may be struggling to buy one.”

• San Francisco Chronicle Editorial Board: “[Proposition 19] is still a flawed package, designed to rev up home sales that benefit real estate agents who could reap more in commissions. It favors one narrow segment of the tax-paying public but does nothing for the rest of the state’s home buyers. The measure shows the convoluted extremes that California’s tangled property tax system produces.”

Whichever way you see it, it’s fairly clear that Proposition 19 is a billion-dollar tax increase on families. It limits one of the best tools parents have to help their children — the right, enshrined in California’s Constitution since 1986, to pass their home and other property on without any increase in property taxes, as a Proposition 19 parent to child transfer.

On the other hand, Proposition 19 still allows residents to avoid property tax reassessment, as long as families move into inherited property inside 12 months, and only as a primary residence. 

California beneficiaries inheriting property from parents can still work with trust lenders to get a loan to a trust you can also get a trust loan to buyout co-beneficiaries, while locking in a low property tax base… You can still easily buyout co-beneficiaries with a transfer of property between siblings.  Beneficiaries can always take advantage of a property tax transfer — in other words, transfer parents’  property taxes to themselves under Prop 19, what used to be Prop 58… and keep parents property taxes after inheriting property, and inheriting property taxes,  for as long as they live in their inherited home… as a standard Proposition 19 parent to child transfer or parent to child exclusion from current property tax rates. 

Moreover, Prop 19 will in fact generate additional property tax revenue, that will supposedly be put to good use in the state of California. So, it cuts both ways.

The Affect of Prop 19 on the Housing Market & Working Families in California

California Proposition 19 Property Tax Assistance

California Proposition 19 Property Tax Assistance

Jeanne Radsick, president of The Realtors Group, said recently:  “it’s vital  for homeowners who may be empty-nesters or who are looking to move for health reasons to have more options.  And if they can maintain  stable tax basis, they can live a similar life.  There’s not enough senior housing to accommodate older folks otherwise.”

Still, beneficiaries of Proposition 19 are those who already benefited the most under the state’s existing property tax laws.  Homeowners 55 and older in California are more likely to be older and not poor.  Although, an analysis of Proposition 19 by the California Budget and Policy Center, has some interesting things to say. They are a non-profit that is an advocate for working families and lower-income Californians…. 

At any rate,  their analysis tells us that homeowners in California tend to be more white and wealthier and older.  They seem to be forgetting that homeowners  also happen to be middle class and blue collar; but the study ignores the fact that middle class and working families are the principle users of Proposition 13, Proposition 58 and now of course Prop 19 exclusion for reassessment of property taxes.  Although, the real estate industry does i fact stand to benefit from the increase in home sales that is expected as a result of the Prop 19 measure.  But there’s nothing we can do about it, so we may as well focus on what we can do to lower property taxes.

However. Property tax relief is not chiefly for wealthy Californians nor was it meant for them.  In fact if you crunch the numbers without bias, the high volume of beneficiaries using trust loans to buyout siblings, establishing a low property tax base; while using the parent to child exclusion to avoid property tax reassessment… are mostly middle class.  Not millionaires. We don’t quite follow why they keep making that argument.  Millionaires surely aren’t the only folks interested in Proposition 13 and Prop 58, property tax transfer, or rather the ability to  transfer parents property taxes, to keep parents property taxes while inheriting property taxes during a parent to child transfer, or parent to child exclusion. 

We certainly see more working families and upper middle class families buying out a siblings’ share of a mutually inherited home, than we do corporate CEOs. Another key Proposition 58 benefit… allowing for the exclusion for reassessment of property taxes on transfers between parents and children. Not just for rich people!

Ms. Radsick said that protecting Realtors’ interests was not a driving force behind the push for Proposition 19.  “It is not about making money for the Realtors, for crying out loud,” she said. “It’s about tax fairness for people who need help.”  We need to sit back and really ponder that statement.

Liam Dillon at the Los Angeles Times had some interesting views on the   evolving property tax breaks available to Californians.  He writes:  “The biggest winners under Proposition 19 would be homeowners 55 and older who would pay lower property taxes when moving to a new, more expensive residence.  Currently, homeowners who are 55 or older have a one-time opportunity to retain their existing tax benefits if they move to a home of equal or lesser value within the same county. They can do the same when moving between Los Angeles and nine other counties.

Mr. Dillon goes on to say:  “Proposition 19 would further ease the tax burden by allowing the same group of senior homeowners to blend the taxable value of their old house with the purchase price of a new, more expensive home, reducing the property tax payment they’d otherwise face.   Disabled homeowners would receive the benefit as well. The rules under Proposition 19 would extend to every county in the state, and homeowners could take advantage of the break as many as three times when they decide to move.”

The downside, from our viewpoint, is the fact that given higher property taxes, using  inherited homes as rental properties may soon become unprofitable, without raising rents significantly… and that is not likely to be an effective long-terms solution. The fact of the matter is, these new property tax laws may encourage a lot of residents to sell properties they own, that they intended to leave to their heirs. Hence, realtors and brokers make more money, and that was one intention right from the beginning for Prop 19.

The concern surfacing among analysts revolves around the possibility of important companies leaving California for more business-friendly, lower-taxed states, taking their jobs with them.  As well as young white collar folks in their 20s and 30s, seeking more affordable property to settle into in nearby states; with a new job; focused on raising a family where they won’t get blasted every year with super high property taxes and income taxes, along with a high cost of living.

But, on the other hand… Higher property taxes or not, California will always be an attractive place to live.  There is still exclusion for reassessment of property taxes; there is still sunshine 12 months per year, an ocean nearby, convenient cities and beautiful rural areas 30 minutes away. And you can always find a good deal on most things, if you look for it.  People are always going to want to live in California.

Are Trusts Mainly for Wealthy Folks?

Are Trusts Only for the Wealthy

Are Trusts Only for the Wealthy?

Gifting property to adult children is a great thing to do, no matter the tax breaks – and thankfully, if you live in California and inherit property in that state, you do not need to be mega wealthy with $1,200 per hour tax lawyers to be able to avoid property tax reassessment, or to learn how to use a trust to save on taxes or to buy out siblings’ shares in your inherited real estate… with a trust loan.

Putting it bluntly, it doesn’t hurt to live in a state like California, where you get to save tens of thousands in tax breaks every year, compared to other states…. or compared to California the way it was pre-1978 before Proposition 13, and later in 1986 with Proposition 58, when you started to be able to keep parents property taxes when you’ve inherited property and are able to transfer parents property taxes, inheriting property taxes on a property tax transfer with a simple parent to child transfer or as lawyers call it, parent to child exclusion. Or perhaps lucky to be anywhere, if you can keep that house you inherited in your name, and you have a very good accountant! Another point – why trusts aren’t just for wealthy folks to save on income tax. 

There are trust lenders providing trust loans in California to cure family estate problems, with some beneficiaries insisting on selling inherited property – and no one can agree what the property value is, whether the local tax assessor is right or wrong;  or whether to sell or not to sell.  This is most likely one reason, besides saving on property taxes, that many property tax consultants and tax attorneys firmly believe that lawmakers in every state should pass property tax relief bills that make sense.

It would be advisable for homeowners and beneficiaries inheriting property to go to websites focused on CA Proposition 19, Prop 13, Prop 58, and Proposition 60… such as Michael Wyatt Consulting   and Trust and Estate Loans info-sites  or irrevocable trust lenders, or perhaps niche California focused property tax relief blogs like this one, Property Tax News.  Which is simply to straighten up and learn more about why property tax relief is crucial to California, and would be an economic life-saver to other states, if they were to surprise everyone and gain some genuine leadership, along the lines of what New York has.  So the middle class (not just the millionaires) can live in comfort and security.

As every state in America is now in the throes of a relentless pandemic, with a disastrous affect on businesses and unemployment within local and state economies…  lawmakers in every state would be wise to look at passing a property tax relief bill that would give consumers some financial relief, for example as CA Proposition 13 did in beginning in 1978 and Proposition 58 did in the beginning of that Amendment in 1986, giving Californians the ability to transfer parents property taxes.   

It seemed like a miracle for middle class homeowners in California… and beneficiaries to trusts inheriting a home from parents.  Enabling a property tax transfer solution from parents and grandparents when inheriting a home, and likewise inheriting property taxes – with a parent to child transfer or parent to child exclusion… the urgent need to keep parents property taxes was all of a sudden a reality, thanks to Howard Jarvis and colleagues, regardless of their deeper motivations – and of course the ability to transfer parents property taxes when inheriting property; avoiding property tax reassessment to keep property taxes low, and to have the ability to utilize trusts for a lower tax base – for all Americans; not just for corporate CEOs, VIPs and wealthy families in Beverly Hills, in Santa Barbara, the Marina in San Francisco, or similar locales. 

Does the 1978 Proposition 13 & 1986 Prop 58 still Work for Californians?

Does the 1978 Proposition 13 and 1986 Prop 58 still Work for Californians

Does the 1978 Proposition 13 and 1986 Prop 58 still Work for Californians

History Lesson on Property Tax Relief: Support & Opposition

2020 was an extremely motivated time for pent up anti property tax relief movement in California.  The deceptively entitled “2020 Proposition 13” went to voters on March 3, 2020. This tax hike would have increased California’s overall debt; compelling the state’s school districts to issue more debt, raising property tax bills all across the state. It did not pass, and to put it bluntly, was an utter waste of time and taxpayer’s money.

Unlike Proposition 13 passed by voters in 1978, this 2020 version of Proposition 13 would have doubled the debt caps that currently limit how much bond debt local school districts can acquire. The 2020 Proposition 13 caps on local bond debt would have been increased from 1.25% of assessed property value to 2% for elementary and high school districts, and from 2.5% to 4% for school and community college districts.

The extra property tax revenue from 2020 Prop 13 would have gone into pockets not into roads.  The  2020 Proposition 13 tax hike would have cost taxpayers $740 million per year for 35 years. The cash mainly going to construction-worker unions and contractors that hire everyone, with priority spending going to people working on projects in districts that have signed labor agreements that those in  power prefer.  As we know, the so-called 2020 Proposition 13 failed.

Prop 15 and the Near End of Commercial Property Tax Relief     

Even more dangerous for California, the 2020 Proposition 15 tax hike that was proposed to voters across all 58 counties would have removed the right for commercial property owners to avoid property tax reassessment.  This would have raised property taxes on all commercial and business property owners, which would have raised commercial store rents, office and apt. rentals, rentals on all business tenants would have gone up.  This would in turn have increased prices on all goods and services throughout the state of California.   Considering the outcome on middle class residents and working families, it would not have been a pretty picture.

Supporters of the Proposition 15 campaign raised over $67.6 million mostly from foundations and public service unions. The top three contributors were the Chan Zuckerburg Initiative, California Teachers Association, and SEIU California. Supporters say Prop 15 is a broad coalition of 1600 organizations launched by civil rights organizations, housing groups, parents, teachers, nurses, firefighters and community-based organizations who advocate for equality and justice for communities of color

Opposition to Proposition 15 Campaign has raised over $73.1 million mostly from land developers, agricultural interests and golf and country clubs. The largest donor is the California Business Roundtable Issues PAC that has contributed more than $38 million to the No on 15 Campaign.  The Business Roundtable’s biggest donors are New York-based Blackstone Property Partners who gave $7 million and Michael Hayde, CEO of the Irvine real estate investment firm Western National Group, who gave $4.5 million.

Despite the massive effort towards promoting and passing this tax hike, voters were not sufficiently confused or conned into backing the bill en mass… and they rejected this tax increase on commercial properties, supposedly depriving the California school system of what allegedly could be a significant source of consistent revenue.  Although the true intended recipients of this extra commercial property tax revenue remained under questions… and backers of Proposition 15 – the first major effort to cut into beloved property tax relief afforded by Proposition 13 since it was voted into law in 1978 – finally conceded defeat, and California heaved a statewide sigh of unified relief. 

The question remains – would economic collapse of the statewide   consumer base and working family structure in California have been worth a few extra dollars for the educational system, which is doing relatively well as is?

Last Minute Promotion of Snake Oil Sales to California Voters

Motivated, determined and relentless opponents to property tax relief in California came up with a last minute tax hike measure, Proposition 19 – and the CA Association of Realtors shoved $35 Million at the CA Legislature to promote this unusually deceptive bill, after suffering significant tax hike losses.  They managed to confuse enough voters with disingenuous and deceptive public relations to get Proposition 19 passed – by a hair – and watered down the critical Proposition 58 “parent-to-child exclusion” tax break for middle class beneficiaries and new homeowners. 

This weakened California homeowners’ ability to avoid property tax reassessment without obstacles. So Proposition 19 managed to limit parent to child transfer rights to a one-year window, and only as a primary residence.  No longer could investment properties avoid property tax reassessment.

So the ability to transfer parents property taxes, when inheriting property taxes from a parent, is now on a tighter path. We can still keep parents property taxes but they made it more challenging, in the midst of a Pandemic no less.  Avoiding property tax reassessment and establishing a low property tax base; as well as buying out a sibling’s share of inherited property, meaning the transfer of property between siblings or sibling-to-sibling property transfer – still exists, yet with a few more obstacles to remain aware of. 

We can still transfer parents property taxes in California when  inheriting property and inheriting property taxes from a parent, and remain able to keep parents property taxes on any property tax transfer, such as the parent to child transfer or parent to child exclusion.  It’s just not quite as simple or easy as it was prior to advent of Proposition 19.

Thankfully, enough property tax breaks survived in California to enable property owners to still save significantly on property taxes. Californians can still get a trust loan from a trust lender, working alongside Proposition 58, to buyout a co-beneficiary when inheriting property taxes from a parent – and, most importantly, to establish a low Proposition 13 level property tax base, basically forever for an inherited home, for example from a niche firm like Commercial Loan Corp.  

Most Californians struggling financially from Pandemic shutdowns and health outcomes should research niche blogs like this one, or   info sites like EdSource.org who looks  at both sides of Proposition 15 for example, or SiliconValleyandBeyond.com who examines property taxes and Proposition 19, among other related issues. As well as state government websites such as the  California State Board of Equalization.  The more we know about how to use trust loans and these unique tax breaks, plus other property tax reduction solutions we have access to, the better off we’ll all be going forward.