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.

 

Commercial Loan Corporation Welcomes Tanis Alonso

Tanis Alonso - Account Executive At Commercial Loan Corporation

Tanis Alonso – Account Executive At Commercial Loan Corporation

Commercial Loan Corporation welcomes Tanis Alonso, Account Executive for our Trust & Estate Bridge Loan Department.

Commercial Loan Corporation is very excited to welcome Tanis Alonso as the latest addition to our team! Tanis is an Account Executive in our Trust & Estate Bridge Loan Department. Her primary role is to assist clients, attorneys, trust administrators, paralegals and fiduciaries in obtaining short term bridge loan financing for beneficiaries and heirs that want to take advantage of Proposition 58’s exclusion from property tax reassessment to preserve a parents low Proposition 13 tax base on inherited property.

Tanis Alonso:

“My commitment to my clients is that i will always put your needs first! You can expect 100% transparency from me and i will always look out for your best interest.

Prior to joining the Commercial Loan Corporation team, I attended California State University, Fullerton for Business Management.  I obtained my Real Estate license in 2005, but continued down the path of Restaurant Management advancing into a Customer Service Specialist and Developmental Training Manager. I have a passion for taking care of others, am very detail oriented and have a do whatever it takes mentality.

Outside of work, I like to spend my free time with my family and volunteering with various organizations. My favorite thing to do is take my dog Beau to the dog park so he can play with all his friends.

I am beyond excited to start a new journey with Commercial Loan Corporation and to be working alongside a group of individuals with the upmost integrity and expertise.”

Contact Information For Tanis Alonso:

Tanis Alonso, Account Executive for the Trust & Estate Bridge Loan Department can be reached at 714-442-8995 or by email at talonso@cloanc.com. If you are interested in more information on our Private Money Bridge Loans for Trusts & Estates, please call Tanis or complete the short form located here. For immediate assistance from any member of the Bridge Loan department, please call us at 877-464-1066.

For additional information on our bridge loans that assist clients who are inheriting real estate from a parent and want to keep the existing low property tax payment, please click here.

Estate Loans, Probate Loans, Trust Loans and Inheritance Loans

Estate Loans, Probate Loans, Trust loan and Inheritance Loans

Estate Loans, Probate Loans, Trust loan and Inheritance Loans

Estate Loans, Probate Loans, Trust Loans and Inheritance Loans

If your inheritance includes real estate and you want to preserve your parents or grandparents low property tax rate; there are finance options available to assist you. These loans programs often go by different names but are most commonly referred to as inheritance loans, estate loans, probate loans, or trust loans. In some cases they will also be referred to as hard money loans, private money loans or 3rd party loans for trusts.

Estate, probate, inheritance and trust loans are typically more difficult to come by than conventional real estate mortgages. Often times in order to receive financing on real estate held by a trust, in probate or in an estate, you need to utilize a private money lender. These types of loans are typically intended to be used as short term financing options to provide liquidity to an estate or trust when one is trying to qualify for exclusion for reassessment of property taxes. Once the real estate has been transferred to the beneficiary or heir and the exclusion for property tax reassessment has been secured; that is when the loan is refinanced into a conventional mortgage.

It does not always make sense to utilize a private money, hard money, trust loan, estate loan or probate loan; but there are situations when it does. The most common reason to do so is when dividing the assets of a trust or estate and there is not sufficient cash liquidity to achieve an equal distribution. For instance, one heir or beneficiary may wish to retain ownership of a property. If that is the case and there is not sufficient assets remaining for an equal distribution to the other parties involved; taking out a mortgage on the property may be the best option.

Providers of inheritance loans, estate loans, probate loans, and trust loans

Inheritance loans, estate loans, probate loans, and trust loans are specialized types of real estate mortgages. It can be difficult to find lenders willing to provide this type of financing. Commercial Loan Corporation specializes in this type of lending. Best of all, unlike many other private money lenders, Commercial Loan Corporation does not charge a pre-pay penalty or have a minimum interest requirement which can be costly. If you or your client is looking to obtain a trust loan, probate loan or estate loan, please call us at 877-464-1066 so that we may assist you. To view testimonials from some of our past clients, please view them here.

For additional information on estate loans, probate loans, and trust loans please complete the trust and estate loan inquiry form located here