Proposition 19 and the Impact on Prop 58 & Property Taxes in California

Proposition 19 and the Impact on Proposition 58

Proposition 19’s Impact on Proposition 58

On Election Day in November of 2020, a tiny margin of votes in California swayed the outcome to pass the California Association of Realtors’ effort to convince California voters that Proposition 19 was a marvelous new property tax break to help older homeowners and families inheriting real estate from parents and grandparents.

Also, there was an extremely clever sentimental component built into the Proposition 19  marketing campaign; that was designed to sway voters with a promise to use a good deal of the projected increase in property tax revenue to beef up budgets for fire-fighters… and the educational system. So who on earth would object to revenue going in those directions?  Obviously, no one.  When in fact, from what we hear, very little revenue will actually be going in that direction, and instead will reportedly be used to pay for unfunded state government pensions “and/or related needs…”

All those opposing this property tax measure wanted homeowners over 55 and those who are “severely disabled” (and naturally this will affect a certain number of  older residents) to continue to keep the same number of times they can transfer their tax assessments.

Proposition 19 marketing language dances around this “severely disabled” issue… avoiding specific guidelines for Californians as to what marks the difference between “normally” or “moderately” disabled, let’s say… and “severely” disabled!  And instead, allows homeowners who are  over 55, and reportedly “severely disabled”, or whose homes were destroyed by wildfire or some other “natural disaster” – to transfer their primary residence’s property tax base value to a replacement residence of any value, anywhere in the state.

Jon Coupal, President of the Howard Jarvis Taxpayers Association, summed it up pretty well when he said, “Proposition 19 is an attempt by Sacramento politicians to raise property taxes by removing two voter-approved taxpayer protections from the State Constitution. This measure would require reassessment to market value of property transferred from parents to children, and from grandparents to grandchildren.”

The small print, and in fact in this case micro-print, continues to give folks inheriting property from parents the ability to avoid property tax reassessment… but only if they use the property as a primary residence, and only if they move in within 12-months after the parent passes away. 

As long as this deadline is met, Prop 19 apparently does not violate the Proposition 13 transfer of property,  or property tax transfer in general… And for beneficiaries looking to sell their property shares, there are trust fund solutions to help avoid beneficiary conflicts tied into Proposition 58 and Prop 13 tax breaks, for California property owners, or to work around the new Proposition 19 property tax obstacle that forces homeowners to move into inherited property within one year or lose the “Parent to Child Exclusion”. 

Californians will still be able to transfer parents property taxes when inheriting property, and inheriting property taxes from parents –  beneficiaries can keep parents property taxes, there is no other assessment or reappraisal imposed on the Proposition 58 Transfers Between Parent and Child; Grandparent and Grandchild as discussed on the BOE site in the section regarding the Proposition 58 Parent to Child Exclusion or Parent to Child Transfer; or on any other transfer of property between siblings, such as a buyout of co-beneficiary property shares.         

“Severely disabled” is pretty vague language however.  How can you actually define that, with parameters that California trust beneficiaries, estate heirs, and homeowners can follow? Clearly, you cannot.  

Proposition 19 waters down the Proposition 58 Parent to Child Exclusion or Exemption to some degree, although we can still work with it, but it limits property tax breaks, as they say, for “certain transfers of real property between family members”. Proposition 19 limits the exclusion from reassessment for transfers from a parent to a child of $1 million of fair market value. If the property value exceeds $1 million, it will be partially reassessed but not to full market value (i.e., FMV less $1 million). If the child/beneficiary does not use the home as a primary residence, it is reassessed at full market value (FMV).  Naturally, Proposition 19 is not retroactive and will not apply to any property until it is transferred (or deemed transferred) after Feb. 15, 2021.

So far, Proposition 19 is mainly impacting the Proposition 58 Parent to Child Exclusion From Property Tax Reassessment; and the limits they reference refer only to the 12-month deadline plus beneficiaries using a property tax transfer when inheriting property taxes only for a primary residence – not for an investment property that can be rented out. They claim to be expanding tax benefits for transfers of family farms as well, although we don’t know precisely what this entails.

Children or grandchildren who inherit their parents’ or grandparents’ primary residence but do not move in as their own primary residence will be re-assessed at current market value. This will affect many families, like established family farms. For example, if a family farm that was purchased for $300,000 (600 acres at $500 per acre) a generation ago with a tax bill of $3,500 – this could be reassessed by the tax assessor to be $6,000,000 (600 acres at $10,000 per acre; price per acre could vary depending on market area) resulting in a tax of approximately $72,000.

How are families supposed to deal with this sort of tax hike? Could the California Legislature be this greedy for extra tax revenue (i.e., that they were doing perfectly well without for decades) as to completely ignore the ability for families to survive under these sort of extreme property tax conditions? In the long run, how does thousands of family farm businesses going bankrupt possibly help California?

This significant property tax increase could affect many family farms that were once profitable in terms of basic survival going forward under these tax conditions. So you understand all this and can make sense of all these details? No? Well get in line because short of attorneys and CPAs, no one else understands all the fine points either!

Why Californians Need Proposition 58 and Enhanced Property Tax Breaks

Why Californians Need Proposition 58 and Enhanced Property Tax Breaks

Why Californians Need Proposition 58 and Enhanced Property Tax Breaks

As we all know, Proposition 58 has been tampered with, in the form of Proposition 19; finally giving the CA Legislature the opportunity they have been waiting for, for decades, to water down property tax relief in California.  However, despite this, the state still has property tax relief options that are materially sound. They certainly should not be taking payment plans seriously, that are  offered up by California Governor Gavin Newsom as a realistic  way to “help” homeowners that owe the state on past due property taxes.

Sure, why not allow property owners to pay off what they owe more slowly. But the Governor and his team should also be looking at far more robust options, where homeowners can actually spend less, and save more.  So middle class residents can access the type of tax cuts and property tax breaks that rich folks have enjoyed for decades.

For once, we’re talking about tax cuts for middle class residents, the type that upscale beneficiaries receive through high-end tax attorneys and expensive CPAs; with a trust loan, in concert with tax benefits from Proposition 58… which enables them to buyout siblings who own a share of the house their family has inherited. So they can own an inherited home by themselves, with a low Proposition 13 property tax base.

For many middle class heirs, it’s a perfect package.  Although you still have to use Proposition 58 within year one after mom or dad passes… to utilize the CA Parent to Child Exemption – if you want to continue inheriting your parents’ property taxes.  To avoid paying property taxes at present market value, in order to keep parents’  low property taxes, completely avoiding property tax reassessment. 

In order to prevent a cleverly disguised Proposition 19 or Proposition 15 type of tax measure to come along and weaken, or even remove, property tax breaks for middle class residents – California needs to strengthen the state’s property tax laws, and cement measures that,    despite Proposition 19, still  can guarantee the right to a property tax transfer with a parent to child exemption, or parent to child exclusion; as long as you have a reliable trust lender you can depend on, for example like the Commercial Loan Corp. in Newport Beach, who can be reached at 877-464-1066.  They apparently have the resources to not only provide the money to equalize co-beneficiary funding, establishing a sibling-to-sibling property buyout,  with a low property tax base to avoid property tax reassessment. 

All of the details that make up the foundation of this process are  verified on blogs like this  one, Property Tax Transfer, or the micro-site that furnishes a deep dive into Proposition 13 and Proposition 58  details and narratives: Trust and Estate Loans.   And for those that prefer the hard cold facts and only the facts, there is the respected  state government Website, the California State Board of Equalization, that provides arguably the most  objective property tax relief overview available anywhere, concerning

Despite the inconveniences imposed by Proposition 19, California still has an intact, robust Proposition 13, and fairly intact Proposition 58 as long as one doesn’t exceed that first 12 month deadline period after the death of a surviving parent, or decedent… and one is sure to move into an inherited home as a primary resident, not renting it out, since this is sole bone critics of Proposition 13, Proposition 58, and the CA Parent to Child Exemption have been gnawing at incessantly for decades – using the Bridges family as their one and only example, over the past 40 years, believe it or not.

The problem with Proposition 19 forcing you, after inheriting property from your parents, to move into your parent’s home as a primary residence, or lose your ability to avoid property tax reassessment… on top of being forced to sell your own home, is the fact that your parent’s house may be too small to suit your family. Or the school district may not be suitable, or may be too far away. Or the commute to your job, after moving, may add an hour or more each way, causing another problem.  No one in the Legislature asked those questions; or even considered these issues as potential problems.

Moreover, the question has arisen among critics of Proposition 19 – is this simply a step to get us to the point where they lower the boom on us – and completely remove the parent to child exclusion, effectively wiping out this critical tax break altogether?  The question has come up… however, no one really knows the answer.

These days, post Proposition 19… California homeowners trust the State Legislature less than ever.  Once it sank in how they had been misled  by Prop 19, and had actually been duped into voting for it.   Luckily, there was enough push-back on this to prevent the CA Legislature from going too far. There is enough property tax relief in the system to be useful to the middle class… to help families that really need this kind of tax break. 

Even if Proposition 19, in terms of property tax relief and it’s front-runner tax break, the CA Parent to Child Exclusion or  Exemption, is like walking around with a sprained ankle… Californians, unlike middle class homeowners in 48 other states, will still have property tax relief to turn to. Even if it does create an inconvenience for homeowners and inheritors of real property, and does need to be repealed in the near future.  It won’t be so easy for the California Legislature communications team, and the Realtors Association press release copywriters, to spin the issues with a deceptive branding campaign and confusing marketing language mis-characterizing the CA Parent to Child Exemption… On the next go ’round it will be a very different story.

What We Need

For one, California needs property tax relief with iron-clad protection, to remain safe from any Proposition 19 or Proposition 15 type of tax obstruction or property tax hike that may come along in the near future to water down or even remove crucial property tax breaks.  Not property tax deferment, as the Governor of California has proposed… Or a payment plan to give folks owing property taxes a little more time to payoff what they owe, as proposed in San Diego by two County supervisors.  To be frank, these suggestions are stingy, and are half-way measures at best. 

Proposition 19 has made the Parent to Child Exclusion challenging enough. So why not propose enhanced property tax relief options now, in the midst of a seemingly endless pandemic.  Where most  Californians are struggling… even impacting the upper middle classes now – upscale homeowners, high-end business property owners, commercial property owning landlords with office or residential tenants, or beneficiaries inheriting property from parents…

Payment plans or deferred tax payments are not what homeowners need. They need help in terms of being able to spend less… as making more is very difficult right now.  So at least let’s help them to spend less! Significant property tax breaks will help accomplish that. Gov. Newsom must be able to see this.  He is not so dense as to miss that point.  We are sure he and his team can come up with some enhancements to what we already have. Roll back Prop 19 for one. Repeal it immediately, as unemployment continues to follow the Covid health disaster like an evil twin!

Then add components to Prop 58, instead of watering it down.  That will help middle class homeowners and commercial property owners to spend less on property taxes.  Tax breaks exactly like the billionaires have – at the disposal of the middle class.  Why should only they and not the middle class and upper middle class have authentic tax cuts?  And plan, then launch, a generous STATE Stimulus Package that will create jobs and heal the sick, as well as preventing any new infections with preventative vaccines that are reliable. This is a good start.

California Proposition 19 Lenders and Irrevocable Trusts

California Proposition 19 Trust Loans

California Proposition 19 Trust Loans

Post Proposition 19 Californians must face certain  changes to the Proposition 58 “Parent to Child Transfer” tax break, the “Parent to Child Exclusion”. 

Property owning Californians now have to grapple with specific challenges, where property tax relief is concerned. It has to be said that, with all due respect, that the realtor community  in California is straining credibility.  They backed Proposition 19, so anything they propose going forward, concerning property taxes or property tax relief, we can assume is only going to benefit the California realtor community.  Not the buyers, or renters…  or owners.  This is fairly obvious. 

Frequently being the wealthiest of the wealthy, we find it ironic that many realtors in California bleat and moan about one family – the Bridges family in Los Angeles – using the one often repeated example to advance the shaky case that everyone in California benefiting from Proposition 13 and Proposition 58 are fabulously wealthy, are elderly, and are intent on buying up all the multi-million dollar beachfront properties in the state, simply to rent out to other fabulously wealthy people from other states, vacationing in Malibu or Santa Cruz or Santa Barbara, having a grand old time – while the besotted realtor community suffers terribly from the lack of homes available to them to go to market. These claims basically debunk themselves.

Moreover, as the claim goes, all because of Proposition 13… and all those rich movie stars buying up all those luxury properties so they can make a few extra dollars every month, reportedly $10,0000 to $15,000, renting out an inherited investment property, like the Bridges do, or did. Again, Bridges being the only name ever used as an example, repeatedly in articles and editorials. Or are the Bridges the only family ever to be involved in this peculiar practice?

We simply cannot figure out why these rabid critics of property tax relief, practically foaming at the mouth, cannot locate another wealthy show business family to bring up when discussing this supposedly “out of control” practice of renting out inherited beachfront properties to vacationers at fairly egregious prices.

Apparently, according to critics of Prop 13 and Prop 58, it’s all because of the families  taking advantage of the “Parent to Child Exclusion” that the real estate market has shrunk a few percentage points over the past few years.  Utilized only, they tell us, by wealthy elderly homeowners and their offspring. No one else. No middle class families, no veterans, no retired folks living on a fixed income.  

And this argument, involving the Bridges family as the sole example of a family of multi-millionaires using an inherited home as an investment property to make a few extra dollars on the side has literally remained unchanged for going on 35 years now.   A lot of people think something is awry with this picture.  So let us take a quick look at the history behind all of this…

So what does the realtor community all across the state of California do, after putting up with supposed armies of rich elderly homeowners and their grown children, renting out inherited luxury homes on the beach for decades – along with having the nerve to actually reside in their own home for decades, simply to take advantage of Proposition 13 or Prop 58, so they can avoid property tax reassessment and rent out luxury homes to upscale tourists?

Apparently also further enraging the realtor community AND the Legislature by also taking advantage of a certain Proposition 58 transfer of property – these wealthy homeowners also take terrible advantage of the California tax system by using these Prop 58 tax breaks to buyout property shares inherited by co-beneficiaries as a transfer of property between siblings – combined with the transfer of parents’ property taxes when they are in fact inheriting property taxes from a parent.

Actually “having the gall” as many critics of property tax relief would put it in the Los Angeles Times or San Fran Chronicle, to basically save a small fortune on a property tax transfer, by exercising their right to keep parents property taxes rather than pay full freight with full up-to-date market rates – paying “their fair share” without “taking advantage” of Proposition 58’s Parent to Child Transfer, or Parent to Child Exclusion.

Apparently, the Legislature and the realtor community are so hard-up for cash that all the property owners in California should be expected to pay reassessed property tax rates, adding thousands, often tens of thousands to ones’ tax bill… and not take advantage of Proposition 13 & 58. Eventually, the Legislature and their friends at the California Association of Realtors  decided something had to be done about this perpetual injustice!

So the California Association of Realtors and other supporters of  a tax measure they called Proposition 19, in 2020, raised $63.8 million ($58.6 million from CAR) and $4.9 million from the National Association of Realtors.  Opponents raised less than $50,000 to wage a political-social campaign, and finally these critics of property tax breaks took down the dreaded Parent to Child Transfer tax break – protected by the triple-dreaded Proposition 58 tax measure since 1986. They weren’t actually able to completely remove this tax break… However, they came awfully close.

Yet as residential or commercial property owners found out, after all the hysteria died down across the state, and property owners finally realize that they had in fact been bamboozled into voting for this tax measure that was turned out after all to be a hungry tax wolf disguised as a charming sheep who just wanted to help seniors and school children. BUT – they still had plenty of property tax relief options left… they were just a bit more challenging to access. Yet that really would be a political third rail. Especially after voters in California finally saw they had been deceived. 

Therefore, despite all the worrying about this, all these property tax relief options remain intact. If we inherit parents’ property from a trust or an estate we can still take advantage of Proposition 13 & 58 to access a large 6 or 7-figure loan to an irrevocable trust to buyout co-beneficiaries so we can own it solo, and keep parents low tax base… frequently without a credit report, without up-front charges, with low interest, no hidden fees, usually in just a few days, and always with very simple terms – unlike your typical bank or credit union.

As long as we have a Prop 58 friendly trust lender, for example like the Commercial Loan Corp. who can reached at 877-464-1066 so you don’t have to hunt for the number… Plus there are a few Websites besides this blog that explore the often misunderstood process of  taking full advantages of Proposition 58 Parent to Child Transfer, or Prop 193 Grandparent to Grandchild Exemption carefully covering Transfers Between Parent and Child or  Grandparent and Grandchild.

And of course there is the often used research Website, with up to date news and  information on Proposition 13 at the Howard Jarvis Taxpayers Association  or for a formal cutting edge look at updated information exclusively vetted and imparted for California property owners, regarding property tax relief for those impacted by Covid-19, at Andersen.com… Moreover, to take advantage of Proposition 13 & 58 whenever and wherever possible!  There is no point in ignoring any property tax assistance you can receive, one way or the other!

Best CA Lender For A Proposition 58 Loan

California Lenders for Irrevocable Trusts

California Lenders for Irrevocable Trusts

When Should a Trust Lender Enter the Picture?

There are many ordinary, middle-income families, often referred to as “trust fund heirs” who put their assets into a trust with the help of an experienced trust lender like Commercial Loan Corp. When Mom or Dad passes away, and the property is held in trust,  some beneficiaries either sell their inherited property or they keep the property and, through  a trust loan and Proposition 58 tax benefits, manage to lock in a low property tax base, and frequently buyout an inherited property from co-beneficiaries, to be able to own an inherited  home without difficulties and complications from shared property ownership. 

On the other  hand, if beneficiaries in that position decide they’d prefer to sell the property directly to an outside buyer, instead of receiving a typically higher payment from a trust loan – then those beneficiaries will get significantly less money due to realtor fees (typically 6%) when the property sells. 

Interestingly enough, beneficiaries will generally net, on average, $16,400 or more by not selling the property – and instead having at least one sibling, a co-beneficiary, take advantage of Proposition 58.  Moreover, the average family estate will net $45,000+ more than if the property was sold outright to an outside buyer, with the  revenue from that sale being divided evenly between the  beneficiaries.

Higher taxes imposed on families by Proposition 19 will tend to compel a great deal of beneficiaries to sell their inherited property, even if their preference is to keep  the old home and/or land.  Naturally, this is often good for realtors, who will tend to bank more commission revenue from increased sales.  However It’s not good for a middle class or working class family who is suffering the loss of a generally beloved Mom or Dad.

A trust lender usually enters the picture when enlisted by a beneficiary, or beneficiaries, who wish to keep their inherited property, while buying out owned shares of the same inherited home, mutually inherited by siblings.

Trust lenders who run their practice with integrity generally work with siblings that have lost a parent and are  helped a great deal by the California Constitution’s provision that serves to protect beneficiaries from owing  thousands of dollars in property taxes,  as they settle estate or trust business matters and typically complicated financial issues.

A trust loan introduced into this type of estate or trust equation allows a beneficiary or beneficiaries, often referred to as “trust fund heirs” by realtors and real estate attorneys, to retain the home they have happily inherited from their Mom or Dad – safely and securely, at a nice low property tax base. 

Meanwhile, without having to actually sell the property, co-beneficiaries walk off happy as clams, with more cash in their pocket having had a loan to an irrevocable trust used to buyout their shares in their inherited property – than if the property had been sold to an outside buyer, at current market value. 

Middle class beneficiaries typically do their own research on how to protect their inheritance from the tax man… On property tax breaks that make real sense, on trust lenders when inheriting property taxes; on property tax transfer and estate planning; and usually on their legal right to keep parents property taxes as well as having the ability to transfer parents property taxes at the same low tax rate that their parents had. 

Many beneficiaries will conduct their own research on property tax benefits first (prior to going to a trust lender) on how to avoid property tax reassessment, on Parent to Child Transfer benefits and  the complex Parent to Child Exclusion (from current tax evaluation). 

Beneficiaries gravitate to info-sites such as the state government BOE site at https://www.boe.ca.gov  or to a well known trust lender like the Commercial Loan Corp firm we mentioned here, they can also be reached at 877-464-1066; generally due to their reputation as a firm with a family  atmosphere, where clients all seem to get treated like V.I.P.s  regardless of their net worth or the value of their inherited property.

Loans to Irrevocable Trusts

Loans to Irrevocable Trusts

Loans to Irrevocable Trusts

How Can I Inherit a Home & Keep the Low Property Tax Base?

Perhaps a lot of regular middle class folks out there waiting for an inheritance aren’t aware of it – but since 2016 many of us in the business of dealing with middle class heirs, waiting for an inheritance in trust or in an estate, involved in an unusually large number of conflicts between heirs or beneficiaries… Frequently turning ugly and downright out of control. 

As you can guess, these conflicts typically revolve around the subject of money… Frequently, in an estate scenario, one or more siblings insist on selling the home they have inherited from Mom or Dad, to generate “fast cash” – often in heated opposition to co-beneficiaries inheriting the same home, for example, who insist on retaining that property, as the emotional or sentimental value for them far exceeds the cash value. 

Hence, this often fires up a serious conflict within the family group.  Or – one or two heirs claim they should be receiving a much larger percentage of the family inheritance, which is frequently based on the sale of inherited property, as cash assets are often very modest in middle class estates these days.

Over the past four or five years, we can clearly see a significant increase in these family squabbles… often, for example, in 17 out of 20 estate or trust situations we often see in-fighting like this, that frequently destroys sibling relationships.  Or perhaps conflicts over the issue “to sell or not to sell” inherited family property, or even conflicts over the assessed value of that property… is merely the match that ignites emotional conflicts that were there under the surface to begin with.  It’s no surprise that we often see at least one or two inheritors, per estate or trust, that want  to keep their inherited home, with one or two, or more, beneficiaries pushing to sell the house as soon as possible. 

It’s very common these days to see siblings lock horns almost immediately, when the subject of selling their inherited home is raised. With additional battles flaring up over who should be receiving the larger share of cash assets – or “who” gets “what”  percentage of the home the family is inheriting.  home left by a beloved parent.  We see this pattern repeated over and over again; the same words, similar disputes and similar claims.

A Trust Loan Solution to Family Conflicts

In California, Prop 58 loans to irrevocable trusts often act as a solution to many family conflicts revolving around sibling disagreements over whether or not the family should  retain or sell inherited property from parents.  With a trust loan working in conjunction with Proposition 58 – a process referred to as Prop 58 loans to irrevocable trusts – you can then buyout  beneficiaries    and  end up owning  your inherited property by yourself.

Interestingly enough, siblings who insisted on selling out actually end up receiving more cash then if there had been no trust loan funded and outside buyers had become involved; so those siblings can move forward with their lives, leaving you in peace. Interestingly enough, most families that call  a trust lender to get this type of funding started and accomplished, know next to nothing about the process of Prop 58 loans to irrevocable trusts. 

Residential and commercial property owners should research and learn all about the benefits provided by trust lenders furnishing loans to irrevocable trusts to enable the buyout of property shares from sibling co-beneficiaries; along with CA Proposition 13 transfer of property, plus locking in a low property tax base rate in conjunction with Proposition 58 – all associated with a transfer of parents’ property and transfer of parents property taxes.

Homeowners in every state should understand what inheriting property taxes is all about, how to keep parents property taxes with property tax transfer of all sorts – and why parent to child transfer, or parent to child exclusion, is so profoundly important at the base root of property tax relief in California… and hopefully in other states as well, if motivated folks begin sending letters and emails to their representatives in Washington, and if, by a miracle, this catches on and actually sprouts results. 

Living in a state with low property taxes can provide a major benefit, rather than a liability, to your life. Even if many homes are pricey perhaps to begin with… lowering property taxes on them, to a number you can really feel, can have a profound affect on your lifestyle, and maintain the quality of your life, to where you need it to be.

Goods and services and real estate can be pricey in states like Connecticut, Texas, California, New York, New Jersey, Massachusetts… these are all expensive states, in terms of day to day living… However, getting a “life-toll” such as property taxes down to a manageable level can change your entire outlook on your life, eliminating that particular financial struggle.

Moreover, the concept of paying yearly taxes on something you purchase and then keep for many years, might be flawed to begin with. What other large purchase you may make continues to charge you fees such as taxes, after the initial [large] purchase? A boat? Plane? Car? Motorcycle? None. Only real property. Perhaps the whole concept of taxing real estate after the initial purchase could use some fresh, new examination.

Speaking of trust liquidation, 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 initially… thanks to the 1978 CA Proposition 13.  Plus, the component involving Prop 58 and  “trust liquidity” is particularly  popular with middle class beneficiaries who want to sell the property shares they have inherited from a parent, and walk off with even more cash than if they had sold out to an outside buyer.  Conversely,  Proposition 58 trust loans are just as popular with members of families inheriting property from parents, who wish to buyout their siblings, co-beneficiaries, that are looking to sell their inherited shares.

California business 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 Prop 13 two-percent tax rate maximum – can maintain a parental property tax transfer basically forever, as a Parent-to-Child Transfer, or Parent-to-Child Exclusion, as long as all requirements for Proposition 58 have been met. Californians can even apply for the same tax break on a secondary property inherited from parents.

If you’re a California property owner who is looking to buyout siblings who insist on selling their inherited property, while retaining the same inherited property from parents with a trust loan, avoiding property tax reassessment from that point on – you can find content that covers this in-depth, along with information on how to get approved for Proposition 58, on a state government Website like the California State Board of Equalization, which is found at  https://www.boe.ca.gov/proptaxes/faqs/propositions58.htm  

A lot of folks research these issues and delve more deeply into California property tax relief, on multiple levels, at established niche  Websites such as Commercial Loan Corp…  or a free resource blog like this one, Property Tax Transfer.  Trust loans working in accord with Proposition 58 or Prop 193 make it possible for heirs and beneficiaries to sell shares of inherited property, a beneficiary buyout of sibling property shares, or as realtors put it, “the transfer of property between siblings”, and “lending money to an irrevocable trust“ – typically from an irrevocable trust loan lender.

The fact is, we need to understand all about our rights, with respect to using a 6-figure loan to an irrevocable trust — not only as a way to buyout co-beneficiaries, but also as a tax break that locks in a low property tax base in line with CA Proposition 13 parental property tax transfer. 

Every property owner in every state in America should be more familiar with current changes to property tax relief laws in California; including the pesky little details that support the invaluable system that allows homeowners and commercial property owners to buy out co-beneficiaries’ mutually inherited property — focusing on the tax laws that makes sibling-to-sibling property transfers work in California.  Someday, perhaps in every state in America, if we want to make property taxes fair and equal to all property owners in this country.

How Does the Prop 58’s Parent to Child Exclusion Work?

California Parent to Child Property Tax Exclusion

California Parent to Child Property Tax Exclusion

Importance of Retaining Proposition 58 & Property Tax Relief

Regardless of what critics of Proposition 58 and Prop 13 have to say in Op-Eds and Editorials in California newspapers… No matter how many times opponents of California property tax relief attempt to completely unravel and decimate invaluable property tax breaks protected by Prop 13 and Prop 58, during a Coronavirus pandemic no less – popular support for property tax relief in California holds… For commercial property owners and homeowners alike.

Despite a win here and there by opponents to property tax relief in California… supporters of watering down critical tax breaks such as the “Parent to Child Exclusion” win a battle here or there chiefly as a result of tricky, deceptive marketing; with slippery snake oil tax measures like Proposition 19 in 2020.

We just narrowly missed a statewide disaster, with the proposed property tax measure Proposition 15 almost passing, which would have resulted in egregious property tax hikes, raising taxes on apt building and office building landlords, commercial shopping center owners and store properties being rented out to hundreds of thousands of commercial tenants all across the state.  

This would have forced commercial and business property owners in all 58 counties in California to raise prices on all goods and services – simply to survive.  Moreover, this would have been the beginning of the final unraveling of the 1978 Proposition 13 tax relief package. The door to worse things to come, so to speak, would have been opened.  Fortunately, the door was closed.  At least for now.

The fact is, if Proposition 15 had passed in Nov. of 2020 everything you buy or rent in the state of California, even online, would have gone sky high.  So, clearly, this was a near miss of a total statewide economic melt-down. As it happens, the other deceptive property tax promoted in 2020, sponsored by the CA Legislature and the California Association of Realtors among others, Proposition 19, did in fact pass.  The lesser of two evils, so to speak.

Although not perfect, there is still enough room within the property tax system in California so beneficiaries inheriting property from parents, and homeowners, can still make good use of Prop 13, of Proposition 58 and the “Parent to Child Exclusion”…  Beneficiaries can still take advantage of trust loans and the ability to buyout co-beneficiaries if they wish to sell off their inherited ownership in inherited property… plus lock down a low Proposition 13 property tax base.  So Proposition 13 remains, for the moment, troubled… but intact.

The right to avoid property tax reassessment is crucial for California’s economic well being. It means beneficiaries can still make use of Prop 58 and irrevocable trust loans to buyout co-beneficiaries wanting to sell off inherited property.  It means residents can inherit and keep parents property taxes, and can transfer parents property taxes. Inheriting property taxes from parents at a low base rate is critical for middle class homeowners. Otherwise, selling off inherited property becomes unavoidable and inevitable.

Middle class heirs, new home owners, frequently are not able to pay current market-value property tax rates – in a hyper expensive state… in the midst of an out-of-control pandemic, where nearly 7 million people in this state are out of work or under-employed, or are still working from home at a 50% salary level.  Not to mention the astronomical costs associated with illness and the loss of life, for family members.  Items that healthcare insurance refuses to pay for.

The folks supporting the realtor community, CA Association of Realtors, politicians running the State Legislature, and organizations such as the California NAACP State Conference, California Senior Advocates League, California Statewide Law Enforcement Association, Californians for Disability Rights, and the Congress of California Seniors simply must begin to look at middle class families and working family life more realistically.  You’d think they would be,  however they apparently did not read the fine print, and were hoodwinked into voting for Prop 19 in Nov of 2020.

By simple good luck homeowners and beneficiaries can still make use of Prop 58 and a trust loan process to buyout inherited property from siblings while locking down a low Proposition 13 protected property tax base.  Had those organizations read the fine print, they would have noticed that certain tax relief protections they took for granted were under direct attack – such as the ability for eligible homeowners to transfer their tax assessments within counties and to homes of equal or lesser market value;  To retain the right for folks age 55 and older, or people with disabilities, to keep the same number of times they are able to transfer their tax assessments;  To be able to transfer tax assessments on inherited homes, including inherited properties not used as primary residences, to be transferred from parent-to-child or grandparent-to-grandchild – without any issues or problems.

California still retains Proposition 13 property tax breaks, and  beneficiaries can still make use of Prop 58 and trust loan funding.  However, had Proposition 15 been successful, and had the Proposition 19 people gotten everything they had wanted – loading all these new proposed property taxes on top of regular working people would have had an extremely negative affect on the majority of the population of California.

Based on their recent efforts, how do the folks running the state of California, in the Legislature, think that adding the property taxes they had wanted to add would affect all these working families? Do they even consider how further unraveling property tax relief would affect the California economy as a whole?

Does it ever occur to the politicos in the Legislature that going further in the direction of eliminating property tax breaks, as they would like to do, would literally be a social and financial disaster for the state as a whole?

The Governor and his friends need to give this some serious thought.

 

Does Prop 58 Actually Exclude Transfers of Property from Reassessment?

Crucial Property Tax Breaks: “The Parent to Child Exclusion”

It would be worthwhile for a professional polling organization in California to conduct a objective poll or survey to see whether homeowners in particular are now more appreciative of the gift they were given in 1978 with Proposition 13 as well as Proposition 58 and how that excludes from reassessment transfers of real property between parents and children, used in conjunction with trust lenders such as the Commercial Loan Corp… referred to as a “Parent to Child Exclusion” or “Parent to Child Transfer” as attorneys like to call it. h

We believe it would be clear from such a poll that Californians now  see more clearly that such precious property tax breaks, more or less taken for granted for decades, are now under direct threat… from numerous organizations, such as the CA Association of Realtors (C.A.R.), the Governor of California and the California Legislature itself, supposedly sworn to protect the rights and financial well being of the general public and not of special interest groups such as C.A.R., California Conference Board of the Amalgamated Transit Unions; California Nurses Association; California Professional Firefighters of California; State Federation of Labor; California NAACP State Conference; California Senior Advocates League; California Statewide Law Enforcement Association; Californians for Disability Rights; and the Congress of California Seniors; just to name a few.

Clearly, seniors, to name one of the larger demographic groups, initially bought into the rather deceptive and confusing messaging concocted by promoters of Proposition 19. And never stepped back to open the hood and examine the hidden data-points and details inside the actual tax measure itself… In other words, examining the steak – not the sizzle. The question is, are voters – seniors specifically – now struggling with buyers’ remorse?  A quick survey would answer that question. 

Only in California do you have property tax breaks for middle class property owners such as Proposition 58 and Proposition 13.  Only in California do you have tax benefits like the Prop 58 Exclusion that enables funding to irrevocable trusts; allowing beneficiaries to buyout co-beneficiaries’ shared inherited  property.  Plus, the ability to lock in a low property tax base, in line with Proposition 13, long-term. Ironically, in most other states,  domestic trusts are mainly used for the purpose of allowing affluent families to defer taxes, or to completely avoid paying certain taxes… frequently moving funds held in trust to overseas accounts. 

At any rate, basic California property tax relief still appears to be holding up, despite a few inconveniences imposed by Proposition 19… such as forcing beneficiaries inheriting a  home from a parent to move into that inherited property strictly as a primary residence, within 12-months – or lose the right to avoid property tax reassessment.

The only other option would be to sell the old home… Frequently at a loss. However, the property tax break is basically  the same as when Proposition 58 was passed by a large margin in 1986. A home and up to $1 million in assessed value of additional real property can be excluded from reassessment when transferred between parents and children. 

This keeps the property tax bill the same, with a few inconvenient additions thrown in to keep taxpayers from getting too happy, and we imagine to make realtors happier, if they are selling more properties, as a result of having more properties to sell.  Along with the CA Legislature, who undoubtedly will rake in more cash from property taxes, despite beneficiaries’ ability to take advantage of the Parent Child Exclusion or Parent to Child Exemption – despite some of the tricky new rules & regulations.  Some will not be able to partake of the Prop 58 Exclusion, and that will undoubtedly drive more cash into the state coffers…. which will make the tax assessors happier as well!

If certain beneficiaries inheriting their parents’ home and other property want to sell their shares, they would have to pay much higher property taxes over that average year and a half time-frame, from the date of death to the close of escrow – yet they can avoid owing on average $8,500 in extra property taxes if they are careful to utilize a trust fund loan in conjunction with the Prop 58 “Parent to Child Exclusion”.

These are invaluable options left to California homeowners and commercial property owners; which should be appreciated by residents of this state, as these property tax breaks are basically  unavailable anywhere else in this country. 

We suggest that Californians try to make the most of these gifts… and at the same time, as this is no longer business as usual due to continued efforts to take these property tax relief measures away from middle class property owners — do as much as possible to actively protect these tax breaks. 

As we have now seen, like democracy itself, there is a very thin line between maintaining property tax relief, and losing it forever.

 

Proposition 58’s Parent to Child Exclusion in 2021

Proposition 58's Parent to Child Exclusion in 2021

Proposition 58’s Parent to Child Exclusion in 2021

It is both crucial and about time for homeowners and commercial property owners in California to step back and take little time to read up on property tax breaks available in all 58 counties in the state – to fully understand exactly how property tax relief works now; how it’s still possible to transfer your current tax-basis to children or grandchildren. With the Proposition 19 property tax measure having revised crucial Proposition 58 property tax relief protections; in place since 1986.

It’s critical for property owners, no matter what their total property value or net worth is, to:

a) take full advantage of property tax relief as it is in 2021 going forward;

b) make sure the changes to Prop 58 “Parent to Child Exclusion” are well understood… that property inherited from a parent is either moved into as a primary residence, within 12-months after the remaining parent passes;

c) make sure they plan on selling their inherited property at a  break-even price or at a profit, if they are not able to move in as a primary residence within 12-months;

d)  insure that, if selling out to an outside buyer is not a preferred option, they understand how to enlist the help of a seasoned trust lender, such as the Commercial Loan Corp in Newport Beach… to get approved for Proposition 58, and to be able to take full advantage of loan funding to an irrevocable trust – used in conjunction with Prop 58 – in order to buyout property ownership from a co-beneficiary, or several siblings, waiting to inherit the same inherited home.

All of this entails learning how to operate successfully under the auspices of CA Proposition 19, passed in Nov of 2020; affecting property tax relief benefits that have been taken for granted by Californians since 1986, and if you factor in key property tax breaks from Proposition 13, having the right to property tax transfer, to avoid property tax reassessment to attain and keep a low property tax  base – since 1978.

It is also important to acknowledge that the majority of “Parent to Child Property Transfers” occur after both parents are gone; and to fully understand how Proposition 58 helps regular middle class homeowners and business property owners in the state of California, and not fall prey to conspiracy theories that claim property tax relief is only for the wealthy. 

The date of passing of the last (surviving) parent is used as the date of transfer for beneficiaries (offspring, or “children”, typically grown children of decedents leaving property to their heirs or beneficiaries).

The average trust beneficiary takes roughly a year and a half to settle an estate after a lone surviving parent passes away, leaving liquid assets and/or real property to heirs or beneficiaries. It is also important to remember that during this time the children of decedents are responsible for continuing to pay the property taxes on their parent’s home and any other property in question. 

Under California law, Proposition 58, Proposition 193 and Proposition 13 (which may also be combined with Proposition 60 and Proposition 90) allows  a parent or grandparent to transfer their current tax-basis to their children or grandchildren. You can still transfer your current tax-basis to heirs in California, it’s just not as ‘free and easy’ as it has been. These benefits can still apply to a gift, a sale, an inheritance, or a hybrid of these property transfers.

More specifically, Proposition 58 and Proposition 193 allow a parent or grandparent to gift or sell their real property during their lifetime, or gift their property at death, to their child or grandchild, and concurrently transfer their Proposition 13 tax basis, and other Proposition 13 benefits, along with the property, thus saving the child or grandchild potentially thousands of dollars per year for as long as they own the property. So not only can you transfer your current tax-basis to beneficiaries,  your beneficiaries who are inheriting property  are also allowed to combine benefits provided by Proposition 58 with a loan to an irrevocable trust, to buyout inherited property shares from siblings who are co-beneficiaries.

Prop 19 was promoted as a way to: “Increase funds for firefighters and wildfire containment programs; to eliminate unfair tax loopholes used by East Coast investors, celebrities, wealthy non-California residents, and trust fund heirs…” again, citing conspiracy theories publicized by critics of property tax relief in California. 

Looking at this legislation in-depth reveals that it also eliminates property tax increase protections for many more California property owners. “East Coast Investors” is a thinly disguised euphemism suggesting that it’s not really about your right to transfer your current tax-basis — it’s about thousands of voracious outside investors “gobbling up properties” on the beach or wherever, and renting them out at egregious prices to rich visitors and vacationers.

Not so. In fact, these property tax measures would affect mostly local residents inheriting property from their parents, not families from nearby states – as critics of property tax relief are claiming – with no evidence whatsoever to back up their claims. No evidence and no proof… simply free-floating conjecture.

Prop 58 Loans

Prop 58 Loans

Prop 58 Loans and Loans to Equalize Trusts

It has been an interesting piece of California history, concerning people who have been  involved in the struggle for, or against, Proposition 19 in 2009–2010 which was not voted into law… as well as the next version of Proposition 19 in 2020, which was voted into law, just barely.

Moreover, Proposition 19, 2020 was promoted in a rather deceptive and  confusing manner, along with a measure called Proposition 15, which did not pass or, as you know – commercial property owners in California would no longer be able to avoid property tax reassessment.

As you also probably know, Proposition 19, 2020 managed to revise certain property tax breaks within Proposition 58, such as the “Parent to Child Exclusion, or, as tax attorneys like to call it, the “Parent to Child Exemption”.

At any rate, there was far too much focus on the recreational use of marijuana surfacing during the 2009–2010 version of CA Proposition 19. This battle descended into a petty conflict involving decade-old personal bias and social prejudice characterizing marijuana as a “socially destructive, addictive drug” (which it apparently is not, according to pharmacological experts) and placed in the same class as crack cocaine or meth-amphetamine, which are indeed socially and personally destructive drugs.

It does seem that the real purpose of Proposition 19 in the 2010 version, away from the grey area of “recreational use of marijuana” which the debate became mired in – was to try to generate $1.5 billion or more for state violent crime fighting needs.  Due to a great deal of personal bias, this never happened. Which is unfortunate, as the state could have used the extra money for legitimately battling violent crime associated with genuinely harmful drugs; as opposed to rather benign couch-potato pot smoking. 

Everyone who owns property in California regarded Proposition 58, voted into law Nov 4 of 1986, as untouchable, sacrosanct, a political third rail not to be touched. It has served to protect homeowners whose debt is at or exceeds $8,500 in additional property taxes, while settling financial affairs after a parent, who has left property to heirs, has passed away.  Proposition 58 also protects a property tax benefit called a “Parent to Child Exclusion” or Exemption, as we have mentioned… allowing beneficiaries inheriting property to avoid property tax reassessment at current market rates.

Moreover, Proposition 58 allows beneficiaries who wish to keep inherited property in their family to buyout co-beneficiaries’ property shares, through a trust loan, and helps those looking to keep their inherited home also retain a Proposition 13 protected low property tax base that their parents paid.

With the advent of Proposition 19, after a long rather disingenuous marketing campaign, middle class families woke up to realize that some of the benefits they thought were fully protected have been watered down; that you will need to move into the house you inherit from parents within a year, as a primary residence, or lose your Parent-to-Child Exclusion.  So it’s still there… but you have to keep an eye on the calendar to avoid losing the tax break altogether. 

So all of a sudden, after both Prop 15 and Prop 19 were proposed… California property owners began to worry, for the first time in decades, about possibly losing the right to keep parents property taxes for themselves, at a nice low rate…It is unthinkable, as expensive as California is, with income tax and other taxes as high as they are – to even consider that we might ever lose our right to a property tax transfer from parents, at low Prop 13 rates; or transfer of property between siblings.  Fortunately for California, this did not occur.

After Proposition 19 was passed, Californians were extremely relieved to see that they would be still have the right to get a loan to an irrevocable trust, in conjunction with Proposition 58; to be able to buyout property shares from co-beneficiaries, as the same simple transfer of property between siblings – known as “buying out siblings’ property shares” or a “sibling to sibling property transfer”, when co-beneficiaries decide to sell their inherited property to an outside buyer.

It was most likely due to notable professionals who supported property tax relief and Prop 58, that Proposition 19 was prevented from going too far. This can be verified at fact-based property tax  blogs like this one, Property Tax Transfer,  and the new Op-Ed oriented micro-site, Loan To A Trust, specifically addressing issues, opinions and fact-based information on Proposition 13 and Prop 58 at Websites belonging to real estate attorneys supporting CA property tax relief, such as property tax specialists like Michael Wyatt and his team of specialists. And certainly thanks to Prop 58 experts and trust lenders with applications for a trust loan, for transfer of property between siblings… that look something like this: https://cloanc.com/apply-online
 
It goes to show us that with some stiff opposition to unreasonable tax measures looking to squash property tax relief in California – even with millions of dollars from the California Legislature and organizations supporting special interests like realtors, such as the CA Association of Realtors (C.A.R.), conspiring tax measure that  attempt to unravel Proposition 58 and/or Proposition 13 can be stopped.  Perhaps not completely; yet at least to a good degree.

PART ONE: Parent to Child Exclusion From Reassessment

Parent to Child Exclusion From Reassessment

Parent to Child Exclusion From Reassessment

Although trust beneficiaries, estate heirs, and homeowners in general hear more and more these days about “trust loans” and “intra-family trusts” used in conjunction with Proposition 58, which has graced Californians with its’ parent to child exclusion from property tax reassessment at current market value… there are, however, a good deal of misconceptions and a fair amount of confusion about this process that we should try to clear up a bit.

With recent changes to property tax relief surfacing, we don’t fully know what the effect these changes will have on Proposition 58 on Prop 13 property tax relief benefits, including the wonderful benefits trust loan funding provides, in terms of buying out property shares inherited by co-beneficiaries, or “sibling to sibling property transfer”, as realtors and tax attorneys like to refer to this process.

Middle class residents are getting more interested in this type of transaction, as it is moving the lending process away from more conventional, credit-based, hard money loans replete with high-interest charges and fine-print fees, piles of invasive personal-info paperwork… monthly payments that go on for years; so on and so forth.

So starting February 16, 2021, if you transfer your property to your children (or, grandchildren, if the parents have passed away), by way of inheritance, gifting, a sale, any hybrid sort of property transfer; estate planning outcomes; etc. – inherited real property taxes will be reassessed at yearly current market value.

Due to changes to the CA Proposition 58 parent to child exclusion benefit, heirs in the future will no longer be privy to inheriting property taxes, your Proposition 13 low tax base or “Proposition 13 Basis” has been California tax law for decades. With Proposition 58 protected rights such as sibling to sibling property transfer, or transferring parents property taxes inexpensively since 1986… with homeowners being able to continue inheriting property taxes, while having the right to keep parents property taxes on pretty much all property tax transfer scenarios.

However, if this property tax issue involving the watering down of Proposition 58 tax relief benefits is in fact a trend… and it does keep going in the direction is appears to be going – beginning with Proposition 19, with the possibility of Proposition 15 re-surfacing again with a more effective marketing plan the next time around – property tax transfer, parent to child transfer of property and the ability to keep parents property taxes may continue to be unraveled to a point where genuine property tax relief in California may be rendered virtually inactive. 

Most Californians certainly hope this will not be the case, since California is the only state with property tax relief programs that really count, so therefore we trust voters will be more circumspect next time, and perhaps pay closer attention the next time a political measure looking to unravel property tax relief in California comes up for a vote – to help the CA Legislature pay for unfunded pensions as well as assisting the California Association of Realtors in getting more homes up into the market for sale!

Let’s hope that does not occur… and keep sending emails and letters, plus phone calls, to our state political representatives, now that it looks like voters are waking up to what they have been manipulated into voting for – not realizing what actually lurked in the details, under the hood of Prop 19 – with heartstring-tugging provisions, cleverly giving Californians something to vote for, with titles such as Property Tax Fairness for Family Homes, Property Tax Fairness for Seniors, the Severely Disabled, and Victims of Wildfire and Natural Disasters. 

The CA Association of Realtors  and the CA Legislature was clearly not going to be able to engender support  for a property tax measure entitled Prop19, Removal of Parent to Child Exclusion & Unraveling Your Right to Avoid Property Tax Reassessment…

A limited version of the parent to child exclusion, or parent to child exemption, does still seem to be secure for beneficiaries; that is to say moving into inherited property as a primary residence within a year after a parent passes away is a safe way to retain Proposition 58 benefits, with, additionally, the valued ability to buyout property inherited by siblings through a trust loan; as long as one is able to  move ones’ residence over the course of a year – essentially turning ones’ life upside down after the death of a parent – which is hopefully not so inconvenient or troublesome as to be paralyzing or traumatic.  And time will tell how this will play out.