Parent to Child Property Tax Transfers in California
Perhaps the greatest benefit of California Proposition 58 and Proposition 19 is the ability those propositions grant to a parent allowing them to transfer their low property tax base to a child. On average avoiding property tax reassessment saves a child inheriting a home over $6,500 a year. In some situations that property tax savings means the difference between a child being able to afford keeping an inherited home or having to sell it.
Depending on the date of death of the parent who is transferring real estate to a child, the child may be able to take advantage of the Proposition 58 benefit or be forced to use the new Proposition 19 property tax transfer benefit. California Proposition 19 went into effect on February 16, 2021. The California Board of Equalization has created a chart (located here) to help you understand the difference between the Prop 58 and the Prop 19 parent to child transfer benefits. The two primary differences boil down to the ability to transfer a home that will not be used as a primary residence and the amount of property value that you are able to exclude from reassessment. Proposition 19 only allows a child to avoid property tax reassessment on a home that will be used as their primary residence, where Proposition 58 does not have that restriction. Additionally, Proposition 19 allows you to exclude the current taxable value plus $1,000,000; where Proposition 58 has no value limitations for a principal residence.
Often times when a trust is involved, a parent will leave a family home to multiple child beneficiaries. When that is the case and one of the children wishes to keep the family home and take advantage of their Proposition 58 or Proposition 19 property tax transfer benefit to avoid property tax reassessment, the trust may need to borrow money against the home so that an equal distribution on trust assets can be made. In many cases the California Board of Equalization will require an equal distribution of the trust assets be made in order to qualify for an exclusion from property tax reassessment. If there are not sufficient cash assets held in the trust, the trust will need to borrow the funds to make the equal distribution. Commercial Loan Corporation is one of the few lenders in California that will make a loan to an irrevocable trust.
We specialize in assisting beneficiaries and trust administrators when a loan to an irrevocable trust is required. If you would like to learn more about how a loan to a trust can help you avoid property tax reassessment on an inherited home, please call us at 877-464-1066.
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.
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.
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.
Parent Child Exclusion From Property Tax Reassessment
Commercial Loan Corporation specializes in helping clients qualify for California Proposition 58’s Parent to Child Exclusion from Property Tax Reassessment with our Trust and Estate loans. You may be wondering what the parent to child exclusion from property tax reassessment is. When a parent passes and leaves a child real estate in California, Prop 58 grants the ability for a child to also inherit the parents low property tax base on the property if certain conditions are met and the appropriate documents are submitted correctly to the county tax assessors office.
How does Commercial Loan Corporation help in that situation?
Often times when there are multiple children involved and one of those children want’s to inherit the property and keep the parents low property taxes, the county assessors office will require an equal distribution of assets be made to all children. Unfortunately most Trust & Estates do not have sufficient cash assets for an equal distribution to be made and that may result in the inherited home being reassessed. Commercial Loan Corporation can assist clients in that situation. Unlike most California lenders, we specialize in assisting customers with the California Proposition 58 parent to child exclusion from property tax reassessment. In fact, we are one of the only California lenders that will lend directly to an Irrevocable Trust with no personal guarantee from the acquiring beneficiary which is often a Board of Equalization requirement when the property is held in an irrevocable trust and multiple beneficiaries are involved.
If you, a family member or a client of yours is inheriting property and are interested in transferring a parents low property tax base please give us a call at 877-464-1066. We can answer any questions you may have and provide you with a free analysis of how much your might be able to save by taking advantage of the California Proposition 58 Parent to Child Exclusion From Property tax Reassessment.
Commercial Loan Corporation is a licensed California lender specializing in making loans to trusts and estates. Unlike most lenders who provide a broad range of loans, we focus specifically on trusts, irrevocable trusts and estates. In fact every month we help clients by providing trust loans so that an equal distribution of assets can be made. Our trust loans help beneficiaries meet the requirements of California Proposition 58 and help them to avoid property tax reassessment on an inherited home.On average we save our clients over $6,000 per year in property taxes by helping them avoid property tax reassessment.When receiving a trust loan from Commercial Loan Corporation, you can count on:
An simplified application process
Quick Approvals and Fast Funding
Our Loans Fund In As Little As 7-Days
Same Day Loan Approvals
The Highest Level of Customer Service
If you, a family member, client or friend may be able to benefit from a trust loan, please call us at 877-464-1066. We provide clients with a no cost estimate on how much might be saved by taking advantage of California Proposition 58’s exclusion from property tax reassessment.
Loans to Irrevocable Trusts
Most banks and lenders are not willing to lend on a property that is held in an Irrevocable Trust. Instead they require that the property be removed from the trust before placing a mortgage upon it. This can make it difficult if not impossible for a beneficiary to qualify for Proposition 58. If you are trying to preserve a parents low Proposition 13 property tax base on an inherited property that is held in a trust, call us at 877-464-1066 and we can help you simplify what can be a complicated process.
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.