Today in California, more and more families are receiving notices that the death of a parent has triggered reassessment of a family property and sharply increased their property tax bill. In an attempt to stem this, the Howard Jarvis Taxpayers Association has filed a ballot initiative with the attorney general’s office to repeal the death tax.
Last November, many voters were unaware that California Proposition 19, which narrowly passed, included a provision that affected intergenerational transfers of homes. Prior to California Proposition 19’s passage, a parent could transfer a home of any value plus up to $1 million of assessed value of other property to their children, without reassessment to market value. However, effective February 16, 2021, this is no longer true.
The Howard Jarvis Taxpayers Association is fighting to restore the ability of parents to pass property to their children without any change to their tax bill and we are working with them to gather the signatures required to get it on the ballot. The new initiative is titled the Repeal the Death Tax Act. It would reverse the Proposition 19 changes to the rules affecting intergenerational transfers. To further protect California families, the measure includes an inflation adjustment for properties in addition to the primary residence. Up to $2.4 million of assessed value would be excluded from reassessment upon transfer, offering significant tax benefits to families that own small business properties or rental units for income. A primary residence of any value would be excluded from reassessment.
Are you interested in helping collect signatures? If you think that you can collect a few, we will mail you a petition with complete instructions. The deadline to collect the necessary signatures is April 29, 2022.
The President of Commercial Loan Corporation, Mr. Kerry Smith was recently published in the Orange County Register regarding California Proposition 19 and the impact made on California residents. In the article, Mr. Smith compares the new Prop 19 property tax transfer benefits to the previous benefits granted to Californian’s by California Prop 58.
Mr. Smith states “It is important to understand how Proposition 58 helps the average Californian. The majority of transfers from parent to child happen after both parents have passed. The date of passing of the last (surviving) parent will be used as the date of transfer to the beneficiaries (children). Our average client takes 17 months to settle the estate after the death of the surviving parent. During this time, the children are responsible for continuing to pay the property taxes on their parent’s home and any other property. Under Proposition 58, passed overwhelmingly by voters in 1986, a home and up to $1 million of assessed value of other property are excluded from reassessment when transferred between parents and children. This keeps the property tax bill the same.”
You may view the entire article on the Orange County Register website located here. If you or a family member are interested in transferring a parents low property tax base on an inherited home and have questions or require a loan to a trust to equalize a trust distribution, please call us at 877-464-1066.
Finding financing for Probate Estates and Irrevocable Trusts in California can be complicated. Most lenders are unwilling to lend on a property until the estate has been settled. The same problems exist for real estate held in an Irrevocable trust; conventional lenders will require the home be removed from the trust in order to provide financing and doing so is likely to jeopardize your ability to take advantage of the Proposition 19 parent to child transfer exclusion. Our private money loans help solve these complex issues. We lend to probate estates and directly to irrevocable trusts, providing the cash needed for trust administrators and beneficiaries to keep a family home and transfer a parents low property tax base.
We are California’s top Trust & Estate lender and have saved Californian’s over $7,800,000 in property taxes by avoiding property reassessment. We specialize in providing clients with the financing needed to qualify for California Proposition 19’s parent to child property tax transfer. Our average client saves over $6,800 each year in property taxes and if you are inheriting a home from a parent, we may be able to assist you as well. We offer competitive rates, have no personal guarantee requirements, offer affordable interest only payments with absolutely no no prepay penalties or minimum interest requirements. We are here to help!
Call us at (877) 464-1066 and we can assist you or your client with a loan to a probate estate or irrevocable trust. We will help you determine your property tax savings, provide you with a free cost benefit analysis and answer any questions you may have on the process.
Recently PropertyTaxNews.org conducted an interview with Commercial Loan Corporation Trust & Estate Loan Account Executive Thad Farrell on the benefits of California Proposition 19 and a loan to an irrevocable trust. Here are some of the highlights from that trust loan interview.
Mr. Thaddeus Farrell is an Account Manager at Commercial Loan Corporation in Newport Beach, California. He arrives from a long, successful career in mortgage banking and is considered a rising star in the Trust Loan marketplace. We were fortunate to have Mr. Farrell agree to share his views on property tax transfers, California Proposition 19, and irrevocable trust loans for new homeowners and beneficiaries in California. ______________________________________________________
Property Tax News: As an account manager with Commercial Loan Corp who do you generally communicate with, on a daily basis?
Thaddeus Farrell: I usually talk to attorneys, licensed fiduciaries, trust or estate administrators, Conservators, trustees, beneficiaries and executors. Mostly regarding their need to keep a parents low property tax rate on an inherited home. Frequently, I follow up with attorneys and work with them during the trust loan process. Part of my job is to help them help their clients. In terms of driving interest from lawyers or CPAs I may be talking to. It’s case by case, and timing, as to what an existing client is in need of at this or that very moment.
Property Tax News: In your opinion sir – what is the most important way Proposition 19 helps families inheriting property in California?
Thaddeus Farrell: Overall, to assist families with their property taxes, transferring property taxes through Proposition 19 as well as helping with buying out co-beneficiaries’ inherited property shares.
Property Tax News: What is it precisely that these California families are trying to accomplish?
Thaddeus Farrell: Simply put, to transfer their parents’ low property tax base. Look at it this way – property reassessment can cripple a family financially. I look at it like this – expenses are a part of life, and when you inherit a family home, if the property is reassessed at current rates, those expenses will usually go sky high. Most middle class people can’t afford to pay that type of tax hike. They want to take advantage of Proposition 19 and a trust loan, transferring CA Property Taxes from a Parent to an Heir tax break, to avoid property tax reassessment, and move into an inherited home within a year as a principle residence, which was their parents’ principle residence formerly protected by Proposition 58 and Prop 13.
Property Tax News: How does Commercial Loan Corp fit in, put very simply?
Thaddeus Farrell: We guide beneficiaries through a process that will maintain their parents’ low property tax base. Usually siblings that want to retain inherited property from parents come to us first, generally after being referred to us by a California Property Tax Consultant, Law Firm or a Trust and Estate Attorney. Middle class families that can’t afford to pay reassessed taxes on an inherited home… Which pretty much sums up most families these days!
Property Tax News: What do you discuss with these attorneys that you speak to about Proposition 19 and a trust loan saving their clients money on property taxes?
Thaddeus Farrell: I make it very clear right away with attorneys that 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 receives approximately $15,000 extra in a cash trust distribution when compared to selling the home because they avoid costly realtor and real estate sale expenses. The child beneficiary keeping the inherited home winds up saving on average $6,200 in yearly property taxes.
Property Tax News: Is it really true that residents save that much?
Thaddeus Farrell: Absolutely! 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. If the property is reassessed – the cost can be very high.
Property Tax News: And we understand you treat everyone the same, regardless of their property’s value, or their net worth.
Thaddeus Farrell: That is correct. We extend the same commitment to everyone. I for one treat each customer like I would treat my brother or my sister. We have never had one unhappy customer in the last three hundred transactions I’m aware of. Five star reviews, five-star Google ratings, no complaints!
Property Tax News: Thad, if someone needs assistance with California Proposition 19, a bridge loan to make an equal distribution to an estate or a trust loan to an irrevocable trust, how can they contact you?
Thaddeus Farrell: They can contact us at (877) 464-1066; we are always happy to help.
Property Tax News: Great. Well, thanks for talking with us today.
Inheriting a home in California, Property Tax Guide
Keep A Parents Low Property Tax Base
Many Californians that are seeking lower property taxes or to keep a parents low property tax base know by now that new property tax relief measures opened up new opportunities for you to take advantage of. If a parent is leaving property to you and your siblings and you’re looking to keep a low property tax base, a loan to an irrevocable trust may be needed to qualify for a California Proposition 19 Parent to Child Exclusion from Property Tax Reassessment.
Highly effective property tax breaks are now available to Californians. If you’re a beneficiary inheriting a home from a parent and the property is currently held in an irrevocable trust; a trust & estate loan to that irrevocable trust is likely required if the trust does not contain sufficient cash to make an equal distribution to all of the child beneficiaries. This is frequently taken advantage of by beneficiaries, perhaps like yourself, who intend to keep a home inherited from parents at the original low property tax base. A loan to an irrevocable trust makes it possible to buyout inherited property shares from co-beneficiaries and greatly speeds up the trust distribution process. A trust loan also saves a great deal of money when compared to selling the family home. Avoiding property reassessment is a property tax relief benefit available to all Californians.
Hands On Experience, Establishing a Low Property Tax Base
If your siblings were receiving their funds from the irrevocable trust by selling the home, they would likely receive far less money. The costs associated with preparing the home for sale, expensive realtor fees and potential closing costs associated with selling the home can be incredibly expensive. When a trust loan is used to facilitate a trust distribution, each beneficiary receives an average of an additional $15,000.00 in distribution when compared to selling the home. The person receiving the family home also benefits greatly. On average our clients save over $6,200.00 a year in property tax savings by avoiding property tax reassessment on an inherited home. Having a specialist to help guide you through some of the advantages of Proposition 19 ends up saving you a lot of money on property taxes.
Trust Loans & Estate Lending in Concert With New Property Tax Breaks
It may sound complicated, but when you speak to your Trust & Estate Attorney, Trust Lender or California Property Tax Consultant, the details become clearer. At Commercial Loan Corporation we specialize in loans to trusts and consistently help Californians inheriting a family home keep their parents low property tax rate. If you are inheriting a home and would like to learn more information on if a loan to an irrevocable trust or a bridge loan is right for you, please call us at 877-464-1066.
As many Californians are aware, a home undergoes reassessment at “ current market value” if it’s transferred, inherited, sold or gifted from one party to another – and, in turn, taxes on the property often increase significantly providing additional revenue to the city and county they are located in. If the sale or transfer is between parent and child, in certain situations, the home won’t undergo reassessment once specific requirements are met and the application to avoid reassessment is filed properly. It is highly recommended that a trust and estate attorney or California property tax consultant are used to advise you in this situation.
California Proposition 58 is established in section 63.1 of the Revenue and Taxation Code and has been modified by California Proposition 19 in 2021. The below bullet points may untangle some of the confusion that has formed around some of the Prop 19 property tax breaks. We need to take note that property tax relief limitations built into Proposition 19 are presently serving as a replacement to the pre-Feb 2021 Proposition 58 parent-to-child exclusion, also referred to as a “parent-child exemption” which protect the child inheriting a home from a parent from property tax reassessment.
• Proposition 19 was more or less rushed through the political and electoral process, passed by the CA Legislature and placed onto the November 2020 ballot. Homeowners’ ability to transfer parents property taxes, in other words the right to keep parents property taxes on any parental property tax transfer, inheriting property taxes from Dad or Mom and enabling heirs to keep parents property taxes are sill in place as valid tax breaks, allowing beneficiaries or heirs to avoid property tax reassessment – the process is just more limited than it was previously.
• Establishing a low property tax base along with the transfer of property between siblings, sibling-to-sibling property transfer – buying out a sibling’s share of inherited property through a trust loan, in conjunction with Prop 58, is still in place, however inheriting property taxes from a parent has been limited in some circumstances by Proposition 19. Still the majority of children can receive a full property tax transfer from a parent on an inherited home.
• Sections of the approved California Proposition 19 documentation and revisions to various sections are vague. To correct these issues, Santa Clara County Tax Assessor Larry Stone was appointed by the California Assessors’ Association (CAA), with four other tax Assessors, to a CAA “committee” to provide clarity to the new Proposition 19 implementation process. The CAA committee has enlisted specialists and tax lawyers throughout California, and is working with the Board of Equalization (BOE) to furnish guidance and where necessary recommend passage, on an urgency basis, towards implementing appropriate statutes.
• Only inherited properties used as primary homes or farms would be eligible for the property tax transfer. Those who are “severely disabled”, or whose homes were destroyed by wildfire or a “natural disaster” can now transfer their primary residence’s property tax base value to a replacement residence of any value, anywhere in the state.
• Eligible homeowners can now take advantage of “special rules” to move to a more expensive home. Their property tax bill would still go up but not by as much as it would be for home buyers that are “not eligible”.
A claim form must now, as of Feb 2021, be completed and signed by the transferors and transferee and filed with the Assessor. A claim has to be filed within three years after the date of purchase or transfer, or prior to the transfer of the real estate to a third party, whichever is earlier.
If a claim form has not been filed by the date specified above it will be timely if filed within six months after the date of mailing of the notice of supplemental or escape assessment for this property. If a claim is not timely filed the exclusion will be granted beginning with the calendar year in which you file your claim.
If you have questions regarding California Proposition 19, Prop 58 and the benefit that you may be entitled to, please call us at 877-464-1066. We can help you determine if a loan to a trust is needed for you to receive your benefit and how much you might be able to save in property taxes by keeping a parents low property tax base on an inherited home.
How to Keep a Parents Low Property Tax Base on an Inherited Home.
A trust loan is commonly used to facilitate an equal distribution to the beneficiaries of an irrevocable trust. This is typically done in order to take advantage of the California Proposition 19 Parent to Child Property Tax Transfer which allows a child to keep a parents low proposition 13 property tax base on an inherited home.
This process, often involving a loan to an irrevocable trust, may also help resolve inherited property conflicts between siblings by quickly providing the needed cash for a trust distribution to occur as opposed to having to wait for a home to be repaired and then sold. Doing so also avoids costly realtor fees associated with selling a home which means that each beneficiary receives more money. As of February 2021, the popular Proposition 58 parent to child exclusion from property tax reassessment is now essentially the Proposition 19 parent to child exclusion. In some cases a child inheriting a home may still be able to qualify for Proposition 58. California Proposition 58 has basically morphed into the Proposition 19 property tax measure. Thankfully, California Prop 19 still enables most beneficiaries to buyout their co-beneficiaries’ shares of inherited property and avoid property tax reassessment in many situations.
In other words, it’s still possible to buyout a siblings portion of an inherited home and keep a parents low property tax base using California Proposition 19. The process is sometimes referred to as a transfer of property between siblings, a sibling to sibling property transfer or a parent to child transfer of property. In order to qualify for Proposition 19, an irrevocable trust or estate will often require a trust loan to meet the third party loan requirement enforced by the California Board of Equalization. This is most common when the trust or estate has insufficient liquid or cash assets in order for an equal distribution to be made to all child beneficiaries.
If you are interested in taking advantage of California Proposition 19 and avoiding property tax reassessment on an inherited home, call us at 877-464-1066. We can help you determine if a third party loan might be needed to provide the funds to equalize a distribution and buyout siblings.
Commercial Loan Corporation is one of only a few California lenders that will lend directly to an irrevocable trust. So what is an irrevocable trust?
An irrevocable trust is a type of trust where its terms cannot be modified, amended or terminated under most conditions. Often times, an irrevocable trust will begin as a living trust and once the grantor passes, will turn into an irrevocable trust. An irrevocable trust designates a trustee and beneficiary(s). The trustee is the person who manages the trust and may also be one of the beneficiaries. An irrevocable trust is commonly used to pass assets to heirs while avoiding probate. When you transfer your assets into an irrevocable trust, you relinquish control of those assets. The trust becomes the owner of the assets at that point.
The reason why most lenders will not lend directly to an irrevocable trust is because the trust is the owner of the assets, as opposed to an individual. This become important when a child is inheriting a home from a parent and would like to use Prop 58, or Prop 19 to keep a parents low property tax base. The California Board of Equalization requires and equal distribution of assets be made when multiple beneficiaries are involved unless specific conditions are met. If there are not sufficient cash assets in the trust to make an equal distribution, then a loan against real estate in the trust will be needed to qualify for the parent to child transfer to avoid property tax reassessment.
That is where Commercial Loan Corporation comes into play. We specialize in lending to trusts and estates; specifically irrevocable trusts. Our trust loans, allow one child to keep an inherited home with the parents low Prop 13 tax base in tact, while the other child beneficiaries receive an equal portion of cash. Everybody wins! By avoiding expensive realtor fees, each beneficiary on average receives and additional $15,000 in inheritance and the child keeping the family home saves on average $6,200 per year in property taxes.
If you, a family member or a client may be able to benefit from a trust loan, we are here to assist you and answer any questions you might have. Please call us at 877-464-1066.
On November 3, 2020, California voters approved Proposition 19, the Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act. Proposition 19 is a California constitutional amendment that limits people who inherit family properties from keeping the low property tax base unless they use the home as their primary residence.
This new proposition will make important changes to existing statewide property tax saving programs for Californians. California Proposition 19 replaces California Proposition 58(1986) and Proposition 193(1996) by limiting parent-and-child transfer and grandparent-to-grandchild transfer exclusions. These Prop 19 changes are likely to go into effect on 2/16/2021. As of right now, the California Board of Equalization is still trying to work out some of the formalities of the new legislation. You can view the Board of Equalization current interpretation of California Proposition 19 here.
Here are the impacts made to Proposition 58 by Proposition 19 as expressed on the California BOE website: California Proposition 19 changes to Proposition 58
The two most significant changes made to Proposition 58 by California Proposition 19 are the restriction to occupancy and the new $1,000,000 benefit limit on a primary home. Even once these changes to Prop 58 are in place, there are still significant benefits available to California residents who inherit a home from a parent. Providing you intend to occupy the home as your primary residence so can still save as much as $10,000 annually in property tax savings.
If you, a family member or client has questions on California Proposition 19, or would like a free benefit analysis on how much you may be able to save by taking advantage of a parent to child property tax transfer, please call us at 877-464-1066.
Please join us this November 13th for the Virtual 46th Annual USC Gould Trust and Estate Conference. We are sponsoring the event again this year and will be available to answer any questions you have on Lending to an Irrevocable Trust or Probate Estate. Our loans assist clients in qualifying for the California Prop 58 Parent to Child Exclusion from Property Tax Reassessment on an inherited home.
Tanis Alonso, one of our Trust & Estate Loan Senior Account Executives will be available for Zoom meetings during the Conference or available by phone at (877) 464-1066 to assist you and provide you with more information on our specialized lending programs. Commercial Loan Corporations is one of the only lenders in California who will lend to an Irrevocable Trusts, allowing our clients to meet the California Board of Equalization requirements to qualify for their Exclusion from Reassessment.
This years USC Gould Trust & Estate Conference Features Information on the following
Keynote Presentation: Bending the Arc of History with Terrence Franklin Practical Topics: Annual Updates, Trustee and Beneficiary Harmony, Anti-SLAPP, Divorce, Stretching Retirement Savings, and Sub-Trust Allocations CE Credit: MCLE, CPE, CFP, PFB, and CTFA (Pending)
8:30 AM – 8:35 AM (PST) Welcome and Introductions 8:35 AM – 10:05 AM (PST) Annual Update: Recent Developments in Probate and Trust and their Practical Applications 10:05 AM – 10:20 AM (PST) Break Sponsored by Professional Fiduciary Association of California 10:20 AM – 11:20 AM (PST) Love in the Time of COVID-19: Trustee and Beneficiary Harmony in Years Like 2020 11:30 AM – 12:30 PM (PST) No-Contest Clauses and the Anti-SLAPP Statute: Traps for the Unwary 12:40 PM – 1:20 PM (PST) Keynote Presentation Sponsored by Signature Resolution: Bending the Arc of History Towards Justice in the Probate Court 1:20 PM – 1:40 PM (PST) Break Sponsored by Jack Barcal, Esq. 1:40 PM – 2:40 PM (PST) Tales from the Dark Side: HELP, My Client Is Getting Divorced (or Married, or Remarried). What Do I Do? 2:50 PM – 3:50 PM (PST) How to Stretch Retirement Savings with a CRUT 4:00 PM – 5:00 PM (PST) Better Late Than Never? The Looming Implications of Late Allocations to Sub-Trusts
For more information on our loans to irrevocable trusts and probate estates, please call us at 877-464-1066. We can provide you or your client with a free cost benefit analysis and let them know exactly how much property saving can be attained by taking advantage of a parent to child property transfer and exclusion from property tax reassessment.