PROPOSITION 58 – CALIFORNIA REVENUE AND TAXATION CODE SECTION 63.1: PARENT-CHILD TRANSFERS

California Proposition 58 Parent to Child Transfer

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.

California Proposition 58 Questions and Answers

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.

 

Lending To A Home In A Trust – USC Trust And Estate Conference

USC Trust And Estate Conference

USC Trust And Estate Conference

Lending To A Home In A Trust In California

Please visit our table at the USC Gould School of Law 44th Annual Trust & Estate Conference on 11/16/2018. Mike Riggs & Tanis Alonso will be available to answer all of your questions on lending to a property held in a trust and how to preserve a property tax base on an inherited property in California. We will be hosting a table at the event from 7:AM to 3:PM and look forward to seeing your there. Exhibit hours are from 7:00 a.m. to 3:00 p.m. in the California Ballroom Foyer. The Ballroom Foyer is located on the 2nd floor. Exhibit tables are located in close proximity to the general sessions.

Loans To Trusts & Estate Properties

If you will not be able to attend the event, but have questions on loans to trusts and properties in a probate estate, please call us at 877-464-1066. We can assist you in understanding how you or a client can benefit from California Proposition 58 by transferring a parents low property tax rate to a child inheriting a home. Commercial Loan Corporation specializes in providing loans to property held in a trusts, including irrevocable trusts so that this can be accomplished. Our trust loans are Prop 58 compliant and allow for an equal distribution of the trust to be made using third party funds.

Click here for a link to use USC Gould School of Law Trust & Estate Flyer for details on how to attending and visit our booth on Loans to Trusts in California.

Loans To Trusts – Trust and Estate Conference.pdf

Orange County Bar Event – Costa Mesa, CA

Orange County Bar Association Event

Orange County Bar Association Event, Costa Mesa, CA

Join Commercial Loan Corporation on October 10th, 2018 at the upcoming Orange County Bar Association event. The Orange County Bar Association Trust & Estates Section Presents “SO YOU THINK YOU CAN NEGOTIATE? Learn Skills and Techniques Leading to Successful Resolutions” at 5:30PM on 10/10/2018 in Costa Mesa, CA.

Mike Riggs, Senior Account Executive at Commercial Loan Corporation will be on hand to answer any questions you have on our Trust & Estate Loans. Commercial Loan Corp specializes in lending to Family Trusts and Estates in Probate. If you are unable to make the event, please call us at 877-464-1066. Our team can review a loan scenario with you or a client to see if they might benefit from one of our Trust & Estate loan programs. Often times, our trust and estate financing is used to equalize a trust or estate distribution to take advantage of Proposition 58 and avoiding property tax reassessment on a home that was inherited from a parent.

Our specialized Trust & Estate finance programs can help a client distribute their trust faster, provide cash for legal fees and save money! Our Trust Loans are typically less expensive than selling a home. That means more money for the beneficiaries and we can fund a Trust or Estate Loan in as little as 7 days!

On average we save our clients over $6,000 a year in property tax payments by avoiding property tax assessment on an inherited property. If you are looking for a loan to a Irrevocable Trust, Family Trust or Estate, please call us at 877-464-1066 for additional details or a free benefit analysis.