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A Solution For Common Inheritance Disagreements

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A Solution For Common Inheritance Disagreements

A Solution For Common Inheritance Disagreements

Many of us who work with estates, heirs and beneficiaries; supplying members of estates with various financial services, loans or cash advance services mainly — frequently see a large number of estates with family problems, typically surfacing in the form of one or more heirs attempting to get more than their fair share of inherited assets, in any number of various illicit or unethical ways.

We see co-heirs insisting they should be receiving a higher percentage of inherited property, or more from a cash account than was apparently written into the will.  We frequently identify conspiracies within estates experiencing problem like this; often between brothers, to illicitly remove inherited assets from another heir, often a vulnerable, formerly trusting sister, more often than we’d like to see.

We often see siblings hiring their own lawyers to ward off siblings that are attempting to receive a larger amount of inherited assets than their fair share.  A pricey but necessary expense. In short, this is a rarely reported problem of inheritance pilfering that, if successful, can cost victimized beneficiaries or heirs a great deal.

We can assume these situations reflect families that tend to not get along very well, and yet you hear time and time again that these siblings got along very well until a parent passes away and inheritance cash became an issue. 

Beneficiaries waiting for an inheritance often claim they got along well with their siblings until a cash inheritance materialized, and then squabbling began and grew into a genuinely heated conflict; with heirs blatantly attempting to help themselves to inherited assets reportedly belonging to other heirs.

This is where a popular solution to estate problems between siblings is introduced — to simply buyout problematic siblings, for  far more than an ordinary buyer would be likely to offer.  As most of us know by now, this involves a loan to an irrevocable trust from a trust lender; used in concert with Proposition 19, formerly with Proposition 58. 

This often initiated by one heir who wishes to keep their parent’s home in the family, while buying out property shares being inherited by frequently unwanted co-beneficiaries with a large  loan to an irrevocable trust… Heirs looking to keep their parents property generally try to get in under the wire, or seek legal counsel, to take advantage of property tax transfer, their right to transfer parents property taxes, and keep parents property taxes.  Inheriting property taxes through a parent to child property tax transfer child transfer and parent-child exclusion, to avoid property tax reassessment.

This process generally involves a fairly large 6-figure to 7-figure loan to an irrevocable trust, in conjunction with a parent-to-child exclusion (from property tax reassessment at current or fair market rates) – providing enough cash to create an equal trust distribution to all beneficiaries being bought out.

Property Tax Relief for All Americans, Not Just California

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Property Tax Relief

Property Tax Relief

A recent survey from Ameriprise Financial:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Trust Loans in California

How to get a trust loan in California

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

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

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

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

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

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

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

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

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

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

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

 

What is the Role of CPAs in Helping Residents With Prop 19 Establish a Low Property Tax Base

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Inheriting Property Taxes in California

Inheriting Property Taxes in California

Inheriting Property Taxes in California From a CPA’s Expert Point of View

Many accountants and property tax consultants these days have reinvented themselves to some degree and have become Proposition 19, 2021 revised property tax relief experts for middle class families and beneficiaries inheriting real property, and for new homeowners in both the middle and upper middle class California income brackets. 

One such noted CA property tax relief expert and CPA, Komal Kabra from Chugh.net, has a lot of interesting things to say, from her focused CPA perspective on property taxes and property tax relief in California.  She tells us:  “Property tax law  protected by Proposition 13 levies property taxes based on a home’s original purchase price, even as the home’s value appreciates over time. Additionally, the law caps property tax at 1% of sale price, with a maximum 2% increase per year.” 

Under  new Proposition 19 property tax regulations, the number of times the tax rate can be transferred to a new home is now three times, versus once under previous tax law… if you are age 55 or older.  Value of the new home compared to the previous home can be any value; and the location of any new home can be anywhere in California. 

Admittedly, this is an excellent improvement offered by Proposition 19, however it is clear that the age issue must be seriously revisited  in the near future, and opened up to embrace younger age groups.  Although it is an interesting turnabout of American age bias, which is typically going the other way around, with bias against folks in the 50 to 60 age group and older. 

CPA Kabra goes on to say:  “Proposition 19, which delivers property tax savings to eligible property owners, including residents who are age 55 or older; Folks that suffer from severe disabilities and people who have lost their house in a wildfire or officially validated natural disaster, such as a dramatic flood or extreme earthquake.” 

Proposition 19 preserves all of these new property tax breaks, while also enabling eligible middle class and upper middle class property owners in California to transfer their lower “base year” property tax rate to a new home of any value, anywhere in the state,  up to three times – affecting homes purchased on or after April 1st of 2021.

Miss Kabra concludes, with a real-world example: “If an eligible homeowner purchases a home of a greater value than their previous home now, under Proposition 19, they will pay a blended tax rate. For example –  let’s take a middle class couple in their 60s, who own  a home worth $600,000 in Los Angeles, which they purchased in 1972 for $200,000.  Let’s say they sell their L.A. home, and purchase a new home for $700,000 in San Diego.  The first $600,000 of the new San Diego home will be taxed based on their original 1972 purchase price of $200,000.  Only the next $100,000 will be taxed based on current or “fair market” value…” 

Saving Money on Property Taxes With Help From the Experts!

There are other challenging property tax issues, as well as critical property tax relief advantages and property tax breaks, for middle class and upper middle class families to address, with which to avoid property tax reassessment, when inheriting property taxes in California…

New property tax relief advantages include the right to transfer parents property taxes and then keep parents property taxes when inheriting property and inheriting property taxes in California, associated with any standard property tax transfer; leading up to and through the parent-child transfer and parent-to-child exclusion (from carrying a “fair market”, or current, property tax burden).  Leading towards Keeping Your Parent’s Low Property Tax Base When Inheriting a Home; or inheriting a new primary residence that requires a transfer of a parent’s low property tax base. 

If done properly with a trust loan from a trust lender a low property tax base can remain in place for decades, when inheriting property taxes in California, saving residential or commercial property owners hundreds of thousands of dollars in the long run.

All the more reason for you to call a property tax consultant or a trust lender experienced in Parent To Child Property Tax Transfer On An Inherited Home as well as the use of irrevocable trust loans and Proposition 19, as well as Proposition 13, to keep your parent’s low property tax base – if you are inheriting a home, or expect to inherit a home at a low property tax rate; and plan to transfer a low property tax base to a new home down the road. 

Or, if you wish to buyout existing co-beneficiaries that are looking to sell their inherited  property shares, while you are set on keeping that same inherited property in the family – plus keeping the same low property tax base your parents enjoyed.  All of these important family issues are well worth careful consideration.

To learn more about your options when inheriting a house from parents – transferring their principle residence’s low property tax base to your new primary residence – call our main line to ask to  speak with a Trust Fund Loan or Property Tax Savings specialist at Property Tax News, or the Commercial Loan Corp, at (877) 756-4454 

PART TWO: Trusts, Intra-Family Loans & Property Tax Benefits in California

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Beneficiary Loans California Proposition 58

Beneficiary Loans California Proposition 58

Beneficiary Trust Loans in Concert with California Proposition 58

The use of trusts  and trust loans by trust attorneys and real estate professionals, other than the process that is  popular in the state of  California, where Prop 58 enables inherited property buyouts —  we see a different yet similarly unique trust loan process described in summary by financial magazine Barrons in the following way: “With interest rates at historic lows—for the time being—wealthy families are turbocharging their estate-planning strategies by pairing intra-family loans with trusts.”  It’s a great concept; a great outcome to save on property taxes.  And it’s nice to see estates paired with trusts and intra-family loans welcomed into the higher-end oxygen at Barrons. There’s just one problem. Only for “wealthy families”.  There is the catch.

It’s not the same as financial visionary Kerry Smith’s brilliant tweak to the trust funding process, at Commercial Loan Corp in California;  with the final outcome showing us that California Prop 58 enables inherited property buyouts plus a low Proposition 13 property tax base for ever.  Mr. Smith’s visionary trust loans are not simply for the wealthy.  This top of the line trust financing process enables inherited property buyouts, largely for middle class beneficiaries, as well as upper middle class heirs, plus wealthy property owners looking to save a great deal of money on property taxes.  No one likes to give the Government their precious cash, that was hard to make, and easy to lose.

 “The Government had plenty of money – they don’t need our property tax cash to survive!”   ge along with locking down a low Proposition 13 driven property tax base, capped at 2% max – and most importantly… for all home owners.  For all beneficiaries, for middle class families, for working class families, and for rich folks… Not just for the wealthy – as the lenders featured in Barrons view the trust loan process – only for folks in the 7 or 8 figure class.

So, clearly… States other than California obviously have their own way of tweaking the trust financing process… both wealthy and middle class families are taking advantage of these unique tweaks, not just  families that are well off, as gossip and rumors have it.

Therefore, you now have trusts paired with intra-family loans and beneficiary loans, with a view towards different ways to tweak the trust loan process, in order to help conflicted beneficiaries of estates and trusts. So – When you get to property tax relief in the state of California,   the unique pairing of trusts and  loans, or probate estates and loans, with Proposition 58 – throws an entirely new spotlight of results  out there for trust beneficiaries and heirs of estates… 

The ability to avoid property tax reassessment and lock in low parents property tax base forever for permanent property tax relief,  for any property transfer, always with low property tax benefits enabled by the use of Proposition 13… working in concert with Proposition 58, enabling inherited property buyouts and lower property transfer tax hits. Always avoiding property tax reassessment – making sure you transfer parents property taxes, even when inheriting business facilities, inheriting property taxes for commercial properties, at  the same low Proposition 13 property tax base your parents enjoyed.

California trust loans are used to resolve numerous inherited property conflicts, between beneficiaries, working alongside CA Proposition 58 – enabling co-beneficiaries to purchase  shares of inherited property, a beneficiary buyout of sibling property shares… while avoiding property tax reassessment.  Generally buying out a sibling’s share of an inherited house, usually with some land – as realtors call it, “a transfer of property between siblings” or “sibling to sibling property transfer” – lending money to an irrevocable trust – from a reliable trust lender… specializing in trust loans, CA Prop 13, and Proposition 58.   That combination of skills and know-how you can’t find just anywhere, even in California.

So you add CA  Proposition 58 and an experienced California trust lender – plus a low Proposition 13 property tax base for beneficiaries, and residential or commercial property owners – while using trust loans with Proposition 58 in various new ways… This has decidedly become an unquestioned, mainstream financing process; referred by bank officers, accountants, property tax specialists and tax attorneys.  Whereas, prior to 1986, one wouldn’t be able to find this type of trust or estate financing anywhere! 

Think about this… even surfacing in a buttoned-up mainstream publication like Barrons, covering the pairing of trusts and trust loans – they reiterate, “Many wealthy families with taxable estates can benefit from cleverly structured trusts and intra-family loans…”  Establishing the fact that non-conventional uses of trusts and loans is an established process in mainstream financial services – if you’re in the 1% bracket!  Nice concept, with agreeable lenders, helping folks to save on property taxes… for rich clientele only. 

However, if you reside in California, and you’re a middle class beneficiary or new home owner, or moderately well off commercial property owner, you can find a more fair minded, well rounded niche lender who will serve your financial needs if you’re not rich, for example like the Inheritance Funding Co. in San Francisco, CA, if your estate is in probate and you need fast cash from a future inheritance, and you don’t even have to be upper middle class, and certainly not wealthy as you do with the firms and trust loan process Barrons favors…

Or if you’re inheriting real property and need a trust loan to buyout siblings and retain a low Prop 13 property tax base that your parents had, then you want something like the Commercial Loan Corporation,  in Newport Beach, CA.  You can forget pairing a trust with a loan and beneficiaries for wealthy families only!  You don’t need those folks.  You can get your estate or trust financial needs met elsewhere!

> Click Here to go to Part Three…

PART ONE: Trusts, Intra-Family Loans & Property Tax Benefits in California

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California Proposition 58

California Proposition 58

Many beneficiaries in California who are inheriting property, and seriously considering trust loans with Proposition 58 to nail down a low California Proposition 13 property tax base… working in conjunction with Prop 58 (property transfer from parents) or Proposition 193 (property transfer from grand parents)  insures an iron clad property transfer tax shelter. Naturally, this provides a solution to a conflict that many estate heirs and trust beneficiaries often run into… with respect to buying out sibling beneficiary property shares, while locking in a low property tax base rate forever.  

This may not sound like much to some folks, but in fact it frequently makes the difference between being able to keep an inherited property, or losing it to the tax man or in a foreclosure due to yearly property taxes that aren’t able to avoid property tax reassessment, and consequently are much too high for a typical middle class property owner to maintain.

Trust loans are used by numerous beneficiaries of trusts, and probate estate heirs, who wish to buyout a co-beneficiary’s interest in a trust-owned home, business property, or land, where certain beneficiary siblings have decided to retain their inherited real property – while other siblings firmly stand their ground, preferring to sell their shares in an inherited property to an outside party.  A trust loan often provides a worthwhile solution to this type of family conflict, so one beneficiary, or several, can buyout other beneficiaries that are looking to sell.  

What is so interesting and unique about this type of estate or trust financing is the fact that the entire process is so different than the usual inheritance funding process, involving trust advances and probate loans. Best to side-step the “wealthy families only” firms, and to run with a trust lender that has a reputation for treating all clients as VIP customers, welcomed into a family-like atmosphere, regardless of the size of their loan.  Like the cloanc.com outfit in Newport Beach.  Naturally, a company like that is quick to secure a loan against real estate owned by the trust, which is a logical first-step, and tends to set clients’ minds at rest, letting everyone know that the process is proceeding forward in a common-sense, professional manner.  

This is completely different than the usual inheritance funding process, which uses the entire estate, real property plus cash and investment estate or trust assets, to supply heirs with an inheritance cash  advance “assignment”, rather than an actual “loan”.  Trust loans that work in conjunction with Proposition 58 serve a very different purpose, and a trustee must approve the trust loan of course, and sign off on the deal.

Beneficiaries and property owners should typically do their own solid  research on this process; on business oriented websites that are easy to understand,  such as Proposition 58 and Prop 13 focused site that offers a professional atmosphere, and provides clear, easy to digest information in an accurate, no-nonsense way… or a free resource site that covers a wide range of property tax relief issues; or even in articles on sites that can be trusted for accuracy, for example at Barrons, in an article like:  “How Family Loans and Trusts Can Create Big Wins”…  Focusing on: “…interest rates at historic lows — for the time being — wealthy families are turbocharging their estate-planning strategies by pairing intra-family loans with trusts… As long as interest rates stay low, many families with taxable estates can similarly benefit from cleverly structured trusts and intra-family loans…”  

A different use of trust loans, as we can see —  yet still a step away from conventional loans; bringing a trust and loan funding into the family mix… With trust loans and Proposition 58 moving the process into an entirely new arena, without the necessity of the involved  family being wealthy, should you be a well-off or middle class property owner or a new  beneficiary in the state of California.

>> Click Here to go to Part Two…

In Tune with Tough Times in California – Free Prop 58 Trust Loan Evaluation – Save Over $6,000 in Property Taxes

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Prop 58 Trust Loan

Prop 58 Trust Loan

California is unique when it comes to utilizing trusts and trust loans, along with taking advantage of incomparable property tax relief measures from as Proposition 13, and exceptional property tax breaks from Proposition 58 (i.e., parental property transfer) and Proposition 193 (i.e., property transfer from grandparents). 

So if you reside in California, are inheriting property there, and want to insure you keep your parent’s low Proposition 13 tax base, along with buying out siblings who insist on selling to an outside buyer – you can go to a niche trust lender who will lend directly to an irrevocable trust for you, to accomplish all of the above.

Commercial Loan Corporation in Newport Beach, CA appears to be everyone’s favorite trust lender, as they specialize in taking full advantage of Proposition 58 & 193 property tax benefits, avoiding property tax reassessment,  making sure you transfer parents property taxes correctly, when inheriting a business facility, home and/or land; abruptly inheriting property taxes that must remain low if you wish to maintain your favored lifestyle!  

You certainly want to work with a lender that has a great deal of experience making sure that beneficiaries and property owners nail down the right to keep parents property taxes, with a low Proposition 13 tax base… for all property tax transfer scenarios, including parent to child transfer, what your attorney probably refers to as “parent to child exclusion”… In other words, exclusion from current property tax reassessment rates. And that typically adds up to saving over $6,000 every year in savings on property taxes. 

The process sounds complicated, but it really just boils down to having a lending firm you can rely on to provide enough liquidity to equalize everything between beneficiaries – providing enough cash to buyout siblings who insist on selling your inherited property; while enabling you to keep that property at a low Proposition 13 tax base.  At the end of the day, it should always be a win-win scenario for everyone involved.

Beneficiaries especially like Commercial Loan Corp’s same-day approval & 7-day funding turnaround – with no hidden fees, a simple application form and flexible underwriting. 

By taking advantage of the Proposition 58 and Prop 193 exclusion;  in tandem with a trust loan, if you happen to be a sibling keeping inherited  property – you get to retain that property and at the same time get to keep parents property taxes, which ends up being a low Proposition 13 base, capped at a 2% maximum rate.  You also get to buyout siblings who insist on selling the inherited home and/or land in question; and ultimately walk off with more money than if they had sold their property shares to an outside buyer.  So what frequently begins as sibling conflict, ends with a win-win resolution for all concerned.  

In many cases, a trust loan is necessary, as otherwise the California State Board of Equalization sees this transaction as a sibling buying out another sibling, or child of the parent. Instead of a parent to child transfer, or parent to child exclusion. The exclusion from present day property tax rate reassessment simply calls for a transfer of property from parent to child.

So the trust loan acts as the bridge, so to speak. You can refer to it  any number of different ways, such as “buying my brother’s share of our house” or “buying out my sister’s property shares”… Or you can call it a transfer of property between siblings, a buy out of siblings share of house, buying out siblings’ property shares, or a sibling to sibling property transfer.  It amounts to the same thing. 

Moreover, regardless of the size of  the trust loan, everyone involved is treated like a V.I.P. client, with first-class cordiality.  Which is the main reason we like to refer this firm.  

You can call Commercial Loan Corporation for a free Proposition 58 Trust Loan Evaluation at 877-464-1066 or visit their website at: https://cloanc.com/

 

CA Proposition 58 & the Trust Loan Process: An Interview With Trust Loan Specialist Ken McNabb

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Loans to Irrevocable Trusts in California

Loans to Irrevocable Trusts in California

Kenneth McNabb is an Account Representative at the Commercial Loan Corporation in Newport Beach, California. We began the interview by asking Ken to address a central issue in this field, namely communicating a rather complex process in very simple terms:

Property Tax Transfer: Hello Ken, how do you disseminate the information you want to get across to prospects and new clients? In order to address financial issues that beneficiaries need to know, to resolve what are often complex financial concerns?

Kenneth McNabb:  I tend to give general information at first, to give potential clients a solid overview… And try to determine exactly how urgent the the financial issues are, that are driving the folks I’m talking to.

Property Tax Transfer: What do you do with a family that appears to be at an impasse, for example cannot agree on the value of an inherited home?

Kenneth McNabb:  When no one in a group of siblings can agree on what the value of a home should be I typically suggest we create a Cost Benefit Analysis and have an appraisal conducted. Plus I make sure I know who wants to sell an inherited property, and who wants to keep the property… and nail down their low Proposition 13 tax base. Everyone wants that low property tax base to be intact forever, of course. Most people do not realize that they can actually save a considerable amount of money by taking out a trust loan to keep a home as opposed to having to pay realtor fees, closing costs and repair costs involved with selling a home.  In fact we save our clients on average more than $40,000.00 when compared to selling a home. That does not include the annual tax savings of over $6,200 by taking advantage of California Proposition 58!


Property Tax Transfer: When in the estate or inheritance timeline do these siblings tend to contact you, contact the firm you work for?

Kenneth McNabb: Some are urgent to get the money right away to buyout siblings…. Some even call us before anyone even passes away! Sometimes it’s a week after the death of a parent… Sometimes it’s a year after someone passes away.

Property Tax Transfer: What is the most important thing in an estate situation like that, that comes to you all mixed up and in conflict?

Kenneth McNabb: The most important thing is the loss of a parent. That’s number one. But also, they all generally agree right at the beginning that they all want to lock down a loan to a trust, to buyout a sibling… to keep an inherited property, and most importantly to make sure they nail down that low Proposition 13 tax base their parents had. Those items are always in the picture as important, even critical, elements. 

Property Tax Transfer: And the next most important thing?

Kenneth McNabb: Well, I suppose that would be – what it means to inherit property from a parent. As maybe a once-in-a-lifetime, singular event.

Property Tax Transfer: Yes, it’s definitely a profound event. Tell me, who do you primarily deal with in your average family group? Typically.

Kenneth McNabb: Not counting the exceptions… Typically, I’m generally dealing with “the captain of the team”. The trust administrator, the person who wants to retain the parents home or oldest sibling. On occasion one of the siblings in an attorney and I will deal with them.

Property Tax Transfer: What does that person, that spokesperson, typically want, most of all?

Kenneth McNabb: I’d have to say that they want to keep the low CA Proposition 13 property tax base. Plus be able to buyout the sibling or siblings who want to sell their shares in that property.

Property Tax Transfer: What about Proposition 58, getting approved, and how it all works in conjunction with a trust loan, besides securing a low CA Proposition 13 property tax base… How do you explain all that? As I see it, this is the key to success in this business. If they don’t “get it” the first time around, they usually just walk away, don’t they? People often push away what they think they can’t understand.

Kenneth McNabb: My job is to make sure they understand this process within the first 30 seconds of the conversation! As usual, I keep everything as simple as possible. I explain Proposition 58 and securing a low CA Proposition 13 property tax base in very, very simple terms… Letting them know, in plain English, without a lot of confusing technical jargon, how an exclusion functions for the property – from parent to child… I always ask them, in simple language, “Would you rather pay property taxes based on the day their parents’ bought the property… Or get hit with a super high current tax base, and pay what would be reassessed now, today…” I suppose you can guess what their choice generally is!

Property Tax Transfer: Right. Doesn’t take a genius to figure that one out!  Everyone wants that low CA Proposition 13 property tax base. Now, although you’re dealing with more or less non-conventional lending issues… How do you deal with non-conventional loan requirements? Where approval is concerned – along the pathway towards final approval for these folks.

Kenneth McNabb: Since we are lending to the trust and not to an individual in most situations, the loan process is very fast and easy.  In fact, we can often close a loan in as little as a week; providing we have received all of the required paperwork. 

Property Tax Transfer: What is the Continuing Legal Education all about? Is that for Trust & Estate attorneys only?

Kenneth McNabb: Commercial Loan Corporation specializes in loans to trusts to help our clients utilize Proposition 58 to keep a parents low Prop 13 property tax base. After doing this for so long, we have become very knowledgeable on California Proposition 58 matters. We partnered with Michael Wyatt, a California Property Tax Consultant that worked in a California Assessors office for over 15 years. Together, we created an authorized Continuing Legal Education course that Attorney’s may take to meet their California continuing legal education requirements.

Property Tax Transfer: Thank you for taking the time to speak with us Ken. If one of our readers needs assistance with California Proposition 58 or has questions about a loan to an irrevocable trust, how may they reach you?

Kenneth McNabb: They can either call us at 877-464-1066 or inquire right on our website.  We are always happy to answer any questions that they are their Attorney may have on the trust or estate loan process.  We can also provide a Free benefit analysis which shows how much each beneficiary will save by using a trust loan to keep a home as opposed to selling it. 

 

PART SEVEN: Coronavirus Crisis in California Motivating Certain Politicians to Push Harder for New Proposition 15 “Split-Roll” Property Tax

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Property Taxes During the Pandemic

Property Taxes During the Pandemic

So let’s wrap this discussion up with a brief recap… and summary.  It  is completely obvious to any reasonable person that even though the new, proposed Proposition 15 commercial & industrial property tax on landlords and business property owners is not aimed at consumers per se – at the end of the day, it is consumers who will pay for this new property tax; paying significantly higher prices for normal everyday goods and services. 

Consumers that have for some time already been struggling with the high cost of living in the state of California… as have residents in, for example, other states at the top of the list of “most expensive states” list…  most expensive American states – such as Hawaii, New York, Washington DC, and Oregon.  States that are this costly to live in do not, and we should repeat do not, need property tax hikes, especially at a time like this when state economies are literally crumbling under the weight of a Coronavirus Pandemic, a tsunami of unemployment, now surpassing 51 million jobless claims nationwide and over 13 million looming evictions; plus a host of other related problematic issues. 

These costs, in California, encompass some of the steepest taxes in the country, including some of the highest gas, income, and sales taxes. In fact, the California Legislature just passed policies that have resulted in residents paying 48% more for electricity than the rest of the nation.  Fact, not opinion.

Adding a new property tax on top of these existing costs will only exacerbate the affordability issue for many Californians. The downside (ironically, there is no upside) of the Proposition 15 business property & industrial facility property tax that Secretary of State Padilla and other powerful political critics of property tax relief in California are not looking at.

We suggest they had better remember we are in the throes of a national Pandemic, with California running particularly high infection rates, and they would do well to start looking at a potentially massive downswing of middle class and working class personal income descent if landlords, business and commercial property owners   abruptly lose their ability to use Proposition 13 to avoid property tax reassessment. At the same time, if business properties have been passed down through family members, countless businesses will be impacted in this fashion, losing their ability to keep parents property taxes and parent to child exclusion in California, when  taking advantage of Proposition 13 and Proposition 58, working through a loan to an irrevocable trust… a Prop 58 transfer of property. 

The great fear is that the next step politicians who oppose Proposition 13 and Prop 58 will take, after opening the door to unraveling property tax relief for businesses, will be to go after property owners’  ability to take advantage of property tax transfer, or the transfer of parents property taxes upon inheriting property taxes in general.  The anxiety running through the state concerns fear that critics of 1978 Proposition 13 now pushing a property tax measure called Proposition 15 (formerly entitled Proposition 13 “Split-Roll” tax) will feel free to go after the right to avoid property tax reassessment, or parent to child transfer and parent to child exclusion in California, if Proposition 15 actually passes in November, 2020.         

Obviously, this will impact all Californians, raising rents, throwing prices of goods and services throughout the state completely off the map of normalcy.  If these folks do not begin looking at this issue more realistically, they are going to step into a deep statewide quagmire of economic quicksand, if this property tax passes in November.

Although politicians on the state level claim that their revised version of the true Proposition 13 property tax relief system, they’re calling “The Split-Roll  Proposition 15” property tax, includes a “small business exemption” that will supposedly fix everything. Don’t believe it.  We suggest you don’t drink the Cool-Aid!  This new property tax on commercial property owners in California will be crippling, to most  businesses and commercial entities, including landlords, in California.  The revised measure supposedly expands the “reassessment exemption” to small business owners with property valued at $3 million or less, up from the initial $2 million threshold.  Sounds like double-talk to most of us. 

One of “us” being the talented, courageous Rob Gutierrez, President of California Taxpayers Association. Mr. Gutierrez says that these supposed “protections” for small businesses aren’t even close to being strong enough to allow these folks to survive – with thousands of jobs for Californians not able to survive in the bargain! More people on the Unemployment Line.

“Because so many small businesses rent as opposed to own their commercial space… higher property taxes on the buildings they rent space in will of course result in more expensive rent for them”, says Mr. Gutierrez… “What that translates into is higher prices for consumers and brick-and-mortar stores. Dry cleaners, grocers, companies that cannot move, will have to find a way to pass these costs on.”

And as usual, who does this get passed on to? That’s right. Us. The consumers.

Faced with higher property taxes, commercial property owners with leases will assuredly be motivated to pass these increased costs on to their tenants.  They’ll have no choice.  For example, the owners of shopping centers or strip-malls, with numerous commercial tenants, if unable to avoid property tax reassessment or parent to child exclusion in California, will without question be compelled to increase rents on their commercial and industrial tenants. Next step, prices on goods and services go up literally overnight.  

So we can only further assume that adding a new property tax to the already heavy burden carried by residents of this great state will only serve to make current economic challenges only more challenging   for regular middle class Californians.  There’s no doubt about it.  Hence the need for California to keep the property tax system as is… Leaving the status quo alone. 

PART SIX: Coronavirus Crisis in California Motivating Certain Politicians to Push Harder for “Split-Roll” Property Tax

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The Property Taxes In California

The Property Taxes In California

The infamous Proposition 15 Split-Roll property tax is naturally unpopular with most Californians… Of course, when did popular preference ever convince politicians of a certain stripe to do anything!  They typically do what will benefit them. 

At any rate, most Californians realize this new property tax, initially titled “Proposition 13 / Split-Roll Property Tax” and now called “Proposition 15”  will end up raising prices of goods and services all across California… Not to mention increasing industrial and commercial rents, not only causing their prices to go up, but worse case scenario forcing many middle class companies to simply close their doors! Or to move out of state… if they’re lucky.  And it’s definitely worth mentioning that minority owned businesses, and other concerns that are bravely holding on without tremendous cash reserves, will be particularly hard hit and negatively impacted.

The fact that (as Jon Coupal, President of the Howard Jarvis Taxpayers Association, says) “tax-hungry public sector labor interests” are determine to strip away genuine Proposition 13 property tax relief protection from business properties and industrial facilities, to bank what they believe will be something in the neighborhood of six to twelve billion dollars per year from property taxes. 

Interestingly enough, even their gross property tax intake projection is tremendously inaccurate and uneven!  If their math is that volatile at merely the initial projection stage, at this point – what will it look like when taxation revenue wheels are turning for real?  Their Proposition 15 measure on the November ballot would apparently  need constant reassessment of business properties, revising the 2% cap in yearly increases; exactly to what degree no one really knows.

Fortunately, most of the public is either old enough to remember, or has older relatives that do remember, what life was like in California before the 1978 Proposition 13 property tax relief measure was passed… Ending up saving property owners and beneficiaries or heirs of estates thousands of dollars in property taxes every year, simply by being able to avoid property tax reassessment in CA. 

It’s fairly obvious to most of us that the new property tax entitled Proposition 15 is guaranteed to not accomplish what critics of property tax relief insist it will accomplish. The outcome is rather clear.  It will merely end up increasing consumer rents;  severely raising commercial and industrial rents; raising the cost of countless goods and services favored by consumers; and force who knows how many mid level companies to go out of business… all across the great Sunshine State.  A colossal disaster, with numerous tentacles, just waiting to happen.  

Californians can never lose sight of what Proposition 13 has accomplished for them, as well as property tax transfer benefits from Proposition 58, from parents; and Proposition 193, from grandparents.  Moreover, what that form of genuine property tax relief really looks like, and exactly what it provides Californians with!  Moreover, fighting a war against a Pandemic, with tens of millions of job losses resulting from the Covid-19 crisis — nothing would help middle class, upper middle class and working class Americans more right now than a nation-wide system of property tax breaks mirroring Proposition 13 & Proposition 58 property tax relief.

Starting with the ability to avoid property tax reassessment in CA… and moving into the legal right, for the very first time, for beneficiaries and property owners in California to be able to transfer parents property taxes upon inheriting property taxes from inherited property; with the ability to keep parents property taxes, and to keep it at the usual Proposition 13 low 2% capped property tax base… For any property tax transfer from parent to offspring, or as they say “parent to child transfer” or “parent to child exclusion”. 

Exclusion, that is, from current property tax reassessment. The right to avoid property tax reassessment in CA is indeed unique, as no other state even comes close to providing this type of middle class property tax relief. And anyone who attempts to come up with  unrealistic reasons to destroy these tax breaks – claiming it’s only for wealthy Californians, or that it’s really all about seniors intentionally keeping their property off the market for this reason or for that reason – is, frankly, delving into fiction. These claims are either exaggerated, or just simply untrue.  

Faced with higher property taxes, commercial property owners with leases will most  likely be motivated to pass these increased costs on to their tenants.  For example, the owners of  shopping centers or strip-malls, with numerous commercial tenants, would be faced with  increased property taxes if the Proposition 15 / Split-Roll tax passes…   and will, without question, increase the rent of every concern you go into every week to purchase new  goods, as well as products you pretty much cannot do without.

As we’ve already indicated here, when faced with more expensive rents, business tenants will be forced to increase the pricing of their products or services, obviously to offset significantly higher rents… The long and the short of it?  This supposedly “revised” Proposition 15 Split-Roll commercial & industrial property tax (cleverly devised reassessment exemption or no reassessment exemption!)  will increase the cost of living across the board for all Californians, right down the line – as sure as we breathe oxygen and need clean air.  

>> Click Here: To Continue to Part Seven…