Inheriting a Home in California – Property Tax Guide. Keeping a parents low property tax base.

Inheriting a home in California, Property Tax Guide

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.

California Proposition 19 – Parent To Child Property Tax Transfer On An Inherited Home

California Property Tax Transfer

California Property Tax Transfer

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.

Irrevocable Trust Loans

Lending to an Irrevocable Trust

Lending to an Irrevocable Trust

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.

California Proposition 19

California Proposition 19

California Proposition 19

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 58California 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.

 

 

Join Us at the 2020 USC Gould Trust & Estate Conference

USC Gould Trust and Estate Conference

USC Gould Trust and Estate Conference

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.

If you are interested in attending this years USC Gould Trust and Estate Conference, please visit their website here for more details: Trust & Estate Conference – Los Angeles

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.

The California Parent to Child Exclusion From Property Tax Reassessment

Parent Child 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.

Property Tax Transfer Interview

Here is a recent interview with Kenneth McNabb (Commercial Loan Corporation Trust & Estate Loan Account Executive) and PropertyTaxTransferTrusts.com. In the interview Ken discusses how Commercial Loan Corporation assists clients with Proposition 58 by using a Trust Loan to infuse a Trust with the funds needed to make an equal distribution and qualify.

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

Kenneth McNabb:  I tend to give general information at first and provide our clients a solid overview. I then determine exactly how urgent the the financial issues are.

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

Kenneth McNabb:  When no one in a group of siblings can agree on what the value of a home should be I typically suggest we create a Cost Benefit Analysis and have an appraisal done. The appraisal is conducted by an independent third party and will show the true value of the home in question. Plus I make sure I know who wants to sell an inherited property, and who wants to keep the property. Typically everyone wants that low property tax base to remain intact. Usually at the root of the issue is that some beneficiaries do not realize that they can actually save a considerable amount of money by taking out a trust loan and having a sibling keep a home as opposed to selling it and having to pay realtor fees, closing costs and the repair costs. Selling an inherited home can be quite expensive. In fact we save our clients on average more than $40,000 when compared to selling a home. That does not include an average annual tax savings of over $6,200 by taking advantage of California Proposition 58! One other benefit is that a trust loan takes far less time that it takes to sell a property; so everyone receives their funds much more quickly.

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

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

Property Tax Transfer: And the next most important thing?

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

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

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

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

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

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

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

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

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

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

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

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

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

California Proposition 13 & Proposition 58

California Proposition 58 and Proposition 13

California Proposition 58 and Proposition 13

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.

Trust and Estates Terms and Definitions

Common Trust and Estate Terms

Common Trust and Estate Terms

Matters pertaining to Trusts and Estates can be complicated, especially if you are unfamiliar with the terminology. The following is a glossary of terms that are commonly used in Trusts and Estates and loans made to trusts.

Administration:
Trust administration refers to the trustees management of trust property according to the terms of the trust after the settlor’s passing.

Beneficiary:
A beneficiary is the person who derives advantage or benefits from something. There can be multiple beneficiaries in a trust. Beneficiaries are names in a trust or will to receive something.

California Proposition 13:
Prop 13 is a California Constitutional amendment enacted in 1978. California Proposition 13 limits the tax rate increase that can be charged annually on real estate. The proposition decreased property taxes by assessing property values at their 1975 value and restricted annual increases of assessed value of real property to an inflation factor, not to exceed 2% per year. Prop 13 also prohibited reassessment of a new real estate property tax base year value except for in cases of either change in ownership, or completion of new construction. 

California Proposition 58:
Prop 58 became effective in November of 1986.  With certain limitations, California Proposition 58 allows for the exclusion for reassessment of property taxes on transfers between parents and children. Prop 58 is codified by section 63.1 of the Revenue and Taxation Code. In the State of California, real estate or real property is reassessed at market value if it is sold or transferred. Property taxes can sometimes increase dramatically as a result. If the sale or transfer is between a parent and their child, under limited circumstances, the property will not be reassessed if certain conditions are met and the proper application is filed in a appropriate amount of time. Prop 58 allows a child inheriting a home to avoid property tax reassessment when acquiring property from a parent.

California Proposition 193:
Effective March of 1996, California Prop 193 is a constitutional amendment approved by the voters of California which excludes from reassessment transfers of real property from grandparents to grandchildren. Prop 193 requires that all the parents of the grandchildren who qualify as children of the grandparents are deceased as of the date of transfer. Prop 193 is also codified by section 63.1 of the Revenue and Taxation Code.

Change in Ownership:
Ownership of real property transferred from one person or entity to another.

Conventional Lender:
A conventional lender is a lender that provides loans that meet the lending criteria of the Federal National Mortgage Association (FNMA “Fannie Mae”) or Federal Home Loan Mortgage Corporation (FHLMC “Freddie Mac”). When it comes to lending to a property held in a trust, a conventional lender will not provide a loan to a trust.  They require that the property first be removed from the trust and placed in the name of an eligible borrower. Commercial Loan Corporation is one of the only California lenders that will lend directly to a trust.

Co-Tenants:
Co-Tenants or tenants in common share a specified proportion of ownership rights of real property.

Disproportional Distribution:
A disproportional distribution is a trust or estate distribution where one or more heirs or beneficiaries receives a larger portion of the distribution of an estate / trust.

Encumber:
To create a claim, limitation on, or liability against real property.

Equal Distribution:
An equal distribution is a trust or estate distribution where all heirs or beneficiaries receive an equal portion of assets in the trust or estate.

Equity:
The difference between the value of real property and anything owed against the real property.

Estate:
All the assets owned by a particular person (less debt) at death.

Executor:
A person or institution appointed by a testator to carry out the terms of their will.

First Right of Refusal:
A contractual right that gives its holder the option to buy real property.

Guarantor:
One that guarantees the repayment of a loan.

Irrevocable Trust:
Type of trust where its terms cannot be modified, amended or terminated without the permission of the grantor’s named beneficiary(ies).

Letter to Assessors:
Board of Equalization’s summaries of court rulings, legal opinions, highlights of enacted legislation, Property Tax Rules and technical bulletins for assessment problems.

Non-Pro Rata:
Each heir / beneficiary receives an equal portion of the entire estate / trust, but not necessarily of each asset.

Option to Purchase:
Opportunity to purchase a piece of real property.

Per Stirpes:
An estate / trust is distributed “per stirpes” if each heir / beneficiary is to receive an equal share of the estate / trust.

Pro Rata:
Each heir / beneficiary receives an equal portion of each asset in an estate / trust.

Probate:
The official proving of a will.

Promissory Note:
A signed document containing a written promise by one party to repay a stated sum to another party.

Proportional Interest:
The interest of one heir / beneficiary divided by the total number of heirs / beneficiaries.

Revocable Trust:
Type of trust where its terms can be modified, amended or terminated dependent on the grantor.

Security Interest:
Enforceable legal claim or lien on real property.

Settlor:
The settlor is the entity that established the trust.  The settlor goes by several other names in matters related to trusts; you may also see them described as the grantor, or trustor. The settlor’s role is to legally transfer control of an asset to a trustee. The trustee then manages it for one or more beneficiaries.

Share / Share Alike:
Each heir / beneficiary receives an equal portion of the estate / trust.

Statutory Powers:
Legal powers given by a statute.

Testator:
The person who made a will.

Trust:
An arrangement whereby a person or entity (trustee) holds assets as its nominal owner for the good of one or more beneficiaries.

Trust Distribution Worksheet:
The final accounting of the assets & liabilities for the distribution of a trust.

Trust Residue:
All of the property that is left after specific gifts are distributed from a trust.

Trustee:
An individual or entity given control or powers of administration of assets in a trust.

Trustor:
The person(s) that created a trust (aka “settlor” or “grantor”).

If you have any questions, please call us at 877-464-1066 and we will do our best to assist you.

Parent to Child Property Tax Transfer

California parent to child property tax transfer

Information on the California parent to child property tax transfer

Parent to Child Property Tax Transfer on California Real Estate

Did you know that in some situations California property owners can transfer a property tax base to another person?  It is possible, but there are some limitations. California Proposition 58 allows parents and children to pass property to one another and avoid property tax reassessment in some cases.

Why is a parent to child property tax transfer important for Californians?

Simply put, it allows you to keep your parents low Prop 13 tax base on an inherited home. This can make the cost of keeping the home more reasonable. Here is an example of how it works. Say a parent purchased a home in 1982 for $125,000.  The parent passes away in 2018 and the property is then worth $800,000. Because California Proposition 13 limits the amount that property taxes can increase to just 2% per year; the parents annual property tax payment may be only $2,000 per year when they pass. If that home were to have its property taxes reassessed, the taxes would jump to around $8,000 per year.

California Proposition 58 allows the child to avoid property tax reassessment on the home inherited from the parent. That means a savings of around $6,000 per year in property taxes for the person inheriting the home. This makes the home more affordable for the child and may allow them to keep the home as opposed to having to sell it. If you have specific question on if you may be eligible for a California Prop 58 exclusion from property tax reassessment, please call us at 877-464-1066.

Can a child inheriting a home avoid property tax reassessment if the home is held in a trust?

Yes, California Proposition 58 does allow a parent to transfer a property held in a trust to a child and avoid property reassessment. That being said, doing so can be complicated when multiple trust beneficiaries are involved. An equal distribution is required in most situations. If there are not sufficient funds in the trust to equalize the distribution, the trust will need to borrow the funds needed. In that situation, the County Assessors office will require that an equal distribution was made with funds provided by a third party loan to the trust in order to grant a Proposition 58 exclusion for reassessment.

Typically at the time of passing, a Family Trust, Living Trust or Revocable Trust becomes an Irrevocable Trust. When the trust becomes irrevocable the ability to make changes to the trust is restricted. The trustee or trust administrator may have few options when it comes to receiving a third party loan on a home held in the irrevocable trust. Most California lenders are not willing to lend on a home or provide a mortgage to an Irrevocable Trust. Even fewer have the experience and proper loan documents to provide a Proposition 58 compliant loan.

Proposition 58 compliant loans to trusts.

Commercial Loan Corporation is one of California’s leading providers of loans to Irrevocable trusts.  Unlike other lenders, this is what we specialize in. While the majority of lenders are unable to lend to an Irrevocable Trust, this is our focus. Every month with assist clients qualify for their California Proposition 58 exclusion from reassessment with our Prop 58 compliant loans to trusts.  If you, a client or a family member are interested in obtaining a mortgage to an irrevocable trust, please call us at 877-464-1066 and we would be happy to assist you.