Recently there has been debate in California if Proposition 13 and Proposition 58 still make sense. Without hesitation, the answer is yes. In June of 1978, California voters passed Proposition 13 with 65% of the total vote. Still, to this day, interestingly enough, 65% of “likely voters” in California still support the Proposition 13 this tax relief initiative.
California Prop 13 stabilized property taxes for Californians and gave a great incentive that encouraged Californian’s to become homeowners. The Proposition 13 tax break made property tax increases more affordable by limiting them to a maximum of 2% annually. Californians are fortunate enough to still be benefiting from this same formula 42 years later.
Proposition 58 works in conjunction with Proposition 13. Prop 58 allows a parent to transfer their Proposition 13 protected property tax base to a child. This is especially important when a child inherits a home from a parent. Prop 58 allows the child to inherit the home without having the property taxes reassessed, saving potentially thousands of dollars annually. This can make a home that may otherwise be unaffordable for the child, now affordable.
Commercial Loan Corporation is excited to welcome Jay Rhein to our Trust and Estate Loan team! Jay’s primary role at Commercial Loan Corporation is to assist clients, Attorneys and Trust Administrators in obtaining mortgages for trusts and estates. Our Trust & Estate Loans help beneficiaries and heirs take advantage of California Proposition 58’s exclusion for property tax reassessment and retain a parents low Proposition 13 tax base on an inherited home. This is accomplished by providing a trust or estate with the cash needed for an equal distribution of assets; one of the California Board of Equalization requirements for Proposition 58.
A few words from Jay Rhein
“I began my career in the real estate business when I was a young lad attending UCLA. I worked in the construction industry (pounding nails) during the summer to pay my way through college.
After I graduated with a degree in economics, my bride and I started our wine distribution business. We represented small family owned wineries. Working hard, we were able to get our wineries into all the major supermarket chains including Safeway, Vons, Albertsons and Ralphs.
For the past six years I have had the privilege of serving as a mortgage banker helping homeowners and business owners achieve their dreams and goals. My proudest moment was when I had the honor of stopping Bank of America from foreclosing the next day on a 104-year-old borrower. I was able to secure a reverse mortgage which will provide enough funds so she can stay in her home for another one hundred and four years.
My goal is to place my customers in the best possible financial position for their future while providing the top customer experience in the industry. Commercial Loan Corporation with its family values gives me the freedom to do this. In fact, the founder insists on it.”
In the State of California, real estate is typically reassessed at market value when it is sold or transferred. As a result, property taxes may increase dramatically due to the new higher assessment value. Prop 58 or Proposition 58 is a California Proposition that with limitations, grants the ability to avoid property reassessment on real estate inherited from a parent in California. With the passage of Proposition 58 in 1986, if the sale or transfer of real estate is between a parent and their child, under some circumstances, the property will not be reassessed if all Board of Equalization conditions are met and the application for exclusion is filed in a appropriate amount of time.
Proposition 58 allows the child who is inheriting the home to avoid property tax reassessment when acquiring property from their parents. The child’s taxes are instead calculated on the parents established Proposition 13 factored base year value, instead of the current market value when the property is acquired.
In some cases in order to qualify for California Proposition 58, when the home is being inherited via a trust or an estate and multiple child beneficiaries are involved, an equal distribution of assets must be made. That is where Commercial Loan Corporation comes in. Commercial Loan Corporation provides third party mortgages to trusts and estates with no personal guarantee required from the acquiring beneficiary or heir. Our trust loan or probate loan provides cash to the beneficiaries who are not inheriting the home and allows the child who is inheriting the home to keep the property and meet one of the key Proposition 58 qualification requirements. On average we help our clients save over six thousand dollars a year in property taxes in addition to eliminating the need to sell the home. This speeds up the distribution process and saves on costly realtor fees.
If you or a client needs a distribution loan to take advantage of California Proposition 58, please call 877-464-1066. We can provide you with a free cost benefit analysis and let you know how much you may be able to save by taking advantage of your Prop 58 property tax benefits.
Apply Online for a Proposition 58 loan: Click Here
Call 877-464-1066 to Optimize Your Trust or Estate Distribution
Commercial Loan Corporation does more than just provide mortgages to Trusts and Estates. We also optimize trust and estate distributions!
What does that mean? Well, we can significantly increase the funds that are distributed to the beneficiaries of a trust or estate. In fact, on average we increase the funds a Trust or Estate distributes by over $40,000.
How we increase distribution funds is simple. We provide a loan directly to the Trust or Estate enabling a beneficiary to keep a family home and providing an equal share of cash to the other beneficiaries. Our Trust Loan eliminates the need to sell a parents home, avoiding the costs association with fixing up a home for sale, costly realtor expenses and seller related closing costs. This ends up being an incredible savings that all the beneficiaries of the trust or estate are all able to share in. Best of all, one of the beneficiaries is able to keep the family home and utilize California Proposition 58 to preserver a parents low Proposition 13 tax base saving on average $6,200 per year in property taxes.
Allow us to optimize your trust or estate!
If you, a family member or a client might be able to benefit from one of our trust and estate loans, please call us at 877-464-1066. We can provide you with a FREE SAVINGS ESTIMATE!
California Proposition 58 Parent to Child Transfer
California Proposition 58 – Transferring Real Estate & Property Tax Base From A Parent To A Child & The Need For A Loan To Equalize A Transfer.
On November 4, 1986, the voters of California adopted Proposition 58, which added subdivision (h) to section 2 of article XIII A of the California Constitution. Subdivision H provides that “purchase” and “change in ownership” do not include the purchase or transfer of a principal residences between parents and children, and that the first one million dollars of the full cash value of all other real property (other than principal residences) between parents and children. Section 63.1 was added to the Revenue and Taxation Code 1 to implement the parent-child exclusion provisions of California Proposition 58 and applies to any purchases or transfers between parents and children that occur on or after November 6, 1986.
The California Board of Equalization who administers Proposition 58 offered guidance to clarify some of the ambiguity of the law. They generated a Questions and Answers document for the California Assessors offices to help them properly handle Prop 58 requests for Parent to Child Transfers and requests to avoid property tax reassessment. California Proposition 58 allows a child to inherit a property from a parent, transferring the home and avoiding tax reassessment. This allows the child to keep the parents low Proposition 13 property tax base. One of the requirements of Prop 58 that the Board of Equalization addressed was the need for an equal distribution to be made when multiple beneficiaries are involved. This information can be found on Page 11 – Question 36 of the board of equalization question and answer document. The document can be located here.
Or at the California Board of Equalization Website – Located Here
Question 36 from the Board or Equalization addresses the following issue:
“A trust allows for non-pro rata distribution. However, the estate is composed primarily of a house and a small savings account. One child wants the real property and one 15 See Simms v. Pope (1990) 218 Cal.App.3d 472, 477; Domenghini v. County of San Luis Obispo (1974) 40 Cal.App.3d 689, 695. 16 Letter To Assessors 91/08. 17 Estate of Russell (1968) 69 Cal 2d 200. Page 11 REVENUE AND TAXATION CODE SECTION 63.1 QUESTIONS AND ANSWERS child wants cash. To equalize distribution, can the trust encumber the real property with a loan and will the transfer of real property still qualify for the parent-child exclusion?
Answer: Yes. When a trustee has the power to distribute trust assets on a pro rata or non-pro rata basis, the distribution of real property to one child qualifies for the parent-child exclusion if the value of the property does not exceed that child’s interest in the total trust estate. A trustee who elects to make a non-pro rata distribution may equalize the value of the other beneficiaries’ interests in the trust assets by encumbering the real property with a loan and distributing the loan proceeds to the other beneficiaries.18 However, a loan cannot be made by any of the beneficiaries of the real property to the trust in order to equalize the trust interests. Such loan would be considered payment for the other beneficiaries’ interests in the real property resulting in a transfer between beneficiaries rather than a transfer from parent to child, which would disqualify the transfer from the parent-child exclusion.”
This is where Commercial Loan Corporation can assist you. A conventional loan can not be used in this situation, since conventional lenders will not lend directly to a trust or estate, and the BOE requires that the loan not be made to the beneficiary but instead to the trust or estate. We are one of the only California lenders that will lend directly to a trust or estate, as opposed to a beneficiary. Our loan enables the beneficiary who is inheriting the property from a trust or estate to avoid a transfer between beneficiaries. This helps them qualify for the Proposition 58 Parent to Child Transfer, enabling them to keep a parents low Proposition 13 tax base. Our average client saves over $6,000 a year in property taxes by taking advantage of their Prop 58 property tax benefit. We will even lend to an irrevocable trust.
If you, a family member or a client may be interested in a loan to help assist with Proposition 58, please call us at 877-464-1066 and we can assist you.
Commercial Loan Corporation will be attending the 2019 – 41st Annual UCLA / CEB Estate Planning Institute at the Marriott in Marina del Ray. If you will be attending the event please visit our Senior Account Executive, Mike Riggs at our booth. Mike will be available to answer any questions you may have on our trust & estate loan programs; including our Proposition 58 loans that can allow for an equal distribution of a trust or estate so that a child can keep a parents low property tax base value on an inherited home. If you will not be attending the Estate Planning Institute event, but have questions on California Proposition 58, please call us at 877-464-1066 and we would be happy to assist you.
Commercial Loan Corporation is a California Lender specializing in Loans to Irrevocable Trusts. We lend the cash you need to distribute a trust and receive your proposition 58 exclusion from property tax reassessment on an inherited home.
Loans to Irrevocable Trusts in California
When it comes time to distribute an irrevocable trust and funds are needed to make an equal distribution, you will find that most lenders are unwilling to lend on real estate that is held in a trust. This becomes extremely problematic if you plan on filing for a California Proposition 58 exclusion from property tax reassessment on real estate being inherited from a parent.
One of the requirements to qualify for an exclusion from property reassessment is for the trust to make an equal distribution of the trust assets to all child beneficiaries. Often times that is not possible to do if one of the trust assets is an expensive piece of California real estate. In the situation where a home is creating an unequal trust distribution, a mortgage or third party loan must be taken out to infuse the trust with enough cash so that the equal distribution can be made. That way one child receives the encumbered property while others receive cash and or other assets, equalizing the distribution of the trust. The state does not allow for the acquiring beneficiary to use their own funds to equalize the distribution. Doing so would create a sibling to sibling buyout and make the beneficiary ineligible for an exclusion from reassessment. That is why a third party loan is required. The problem is that most California lenders will require that the property be removed from the trust in order to lend on the home. Unfortunately, once that is done, you have jeopardized your ability to qualify for the Prop 58 property tax reassessment exclusion since the assets of the trust were distributed unevenly at that point.
The solution is to have a mortgage placed on the home while the property is still held in the irrevocable trust. That is where Commercial Loan Corporation comes in. We are a leading California lender of mortgages for homes held in an irrevocable trust. What makes us unique is that we lend to the trust as opposed to a beneficiary; allowing the beneficiary to qualify for the California Proposition 58 exclusion from property tax reassessment on a home inherited from a parent.
If you, a client, or someone that you know is in need of a loan to a trust, please have them call us at 877-464-1066. We specialize in the process and can answer any questions that they may have. We can also provide them with a free loan benefit proposal. The proposal compares the cost of the trust loan to the benefits received from a Prop 58 parent to child property transfer, ensuring that the trust loan is beneficial. We can also determine how much additional funds you would receive by maximizing your trust distribution. On average we help clients distribute an additional $42,000 to beneficiaries my maximizing their trust distribution.
Trust Loans Booth at the California NAELA Joint Chapters 2019 Summit in San Francisco
Loans to Trusts & Estates
Mike Riggs, Senior Account Executive for Commercial Loan Corporation is attending this years California NAELA Joint Chapters 2019 Summit in San Francisco. If you are an attendee and have any questions on our California Proposition 58 safe loans for Trusts & Estates, please visit Mike at our booth. He can review our Trust Loan Benefit Calculator with you and determine if a trust loan makes sense for your client. As you can see from the sign in the photo above, on average we save our clients $6,200 per year in property taxes by helping them qualify for a parent to child transfer and exclusion from property reassessment.
If you are not attending the California NAELA 2019 Summit, but would like more information on our Proposition 58 third party loans to trust and estates, or would like information on maximizing your trust distribution; please call us at 877-464-1066. We can answer any questions that you might have provide you with a free benefit analysis. On average we help clients distribute an additional $41,000 in proceeds to beneficiaries!
Call Us At 877-464-1066 For Trust Loan Information
Commercial Loan Corporation has partnered with Michael Wyatt to provide continuing legal education to Attorneys and Fiduciaries. Michael Wyatt is a California Property Tax Consultant with over 20 years of experience working in a California Tax Assessors Office. Commercial Loan Corporation is a California Lender that specializes in lending to Trusts and Estates. We are the leading provider of Mortgages to Real Estate held in a Trust to help clients retain a parents low property tax rate on an inherited home.
We are a licensed provider of continuing legal education for the state of California. Our course covers the pitfalls in change of ownership as well as third party loans to trusts and estates to facilitate an equal distribution and transfer of property tax base from a parent to child via an exclusion from property value reassessment. Even better, the course can be performed online and scheduled at a convenient time of your choice during the business hours of Mon-Fri 9am-4pm.
Presentation Name: A Jet Tour through the Mine Fields and Pitfalls of Change of Ownership for Trusts, Legal Entities, Estates and Probates Credits:1 Hour MCLE
Please contact Tanis Alonso at 714-442-8995 or via email at firstname.lastname@example.org and get signed up today!
How to keep a parents property tax rate on an inherited home.
KEEP A LOW PROPERTY TAX RATE ON AN INHERITED HOME
When inheriting a home from a parent or grandparent, California Proposition 58 may allow you to avoid a property tax reassessment. Taking advantage of this Proposition 58 provision can save you thousands of dollars each year in property taxes. In fact, our average client saves over $6,000 a year in property taxes.
In order to avoid a property tax reassessment, certain procedures must be followed and documents must be properly submitted to the county tax assessors office. The process can be complicated. This is especially true when the property is held in a trust or when multiple siblings are inheriting property, money or other assets from a parent. An even distribution of assets is required to qualify and a beneficiary can not contribute their own funds to make an equal distribution. This is where Commercial Loan Corporation can help. We are one of just a few California lenders who provide loans that will not jeopardize a Proposition 58 approval. We are able to lend directly to a trust and do not require a personal guarantee.
Commercial Loan Corporation has a track record of success. We work with a California Property Tax Consultant who has over 15 years of experience working in the California Tax Assessors office. With his assistance we can help you solve even the most challenging cases and help you avoid a property tax reassessment. Call us at 877-464-1066 and let us help you keep a low property tax rate on an inherited home.