Much to the relief of many Californians who are in the process of inheriting a home from a parent, California Proposition 19 allows you keep a parents low property base on the inherited home in many cases. However, quite often, new homeowners and beneficiaries trigger a property tax hike by accident, and end up facing thousands upon thousands of dollars in property taxes, all due to property tax reassessment. Thankfully that can all be avoided with the right advice and a loan to an irrevocable trust when one is needed. Working with Trust & Estate Attorney’s and Property Tax Consultants, we have helped hundreds of clients take advantage of their Prop 19 & Prop 58 benefit with our loans to Irrevocable Trusts. In fact we have helped clients save over 21 million dollars with our loans.
Due to rapidly increasing property values and California Proposition 13 ( which helps keep property taxes low in California ), we save our average client over $6,500 in property taxes each year by avoiding reassessment on an inherited home. Best of all, the process is easy and every beneficiary wins because you are able to avoid the costly real estate fees involved with selling a home.
The California Parent-to-Child Exclusion
As far as parent to child transfers are concerned, when one beneficiary who is inheriting a home decides to buyout property shares inherited by co-beneficiaries (siblings) – to have complete ownership of the property, it’s easy to misstep and mistakenly trigger property tax reassessment. A parent to child property tax transfer in is line with the effort to avoid property tax reassessment under Proposition 19’s parent-child exclusion. Therefore a loan to an irrevocable trust working in conjunction with Proposition 19 allows us to transfer property between siblings – buying out property from siblings. In many situations a loan to an irrevocable trust is needed because there is not sufficient cash assets in the trust to make an equal distribution to all child beneficiaries. That is where we come in.
Choosing the Right Trust Lender to Keep a Parent Low Property Tax Base
Commercial Loan Corporation is one of just a handful of California lenders that will lend money directly to an irrevocable trust with no personal guarantee. We are also the only Trust & Estate Lender in California who works with hundreds of Trust & Estate Attorneys and provides them with California State Bar authorized Continuing Legal Education on the topic of Proposition 19 and lending to an irrevocable trust. If you are a client is in need of a loan to an irrevocable trust, please call us at 877-464-1066. We will answer all of your questions and provide you with a free trust loan benefit analysis.
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.
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.
When it comes time to distribute the assets of an irrevocable trust, a trust loan may be needed if an equal distribution is required or desired. A trust loan provides the trust with liquidity; supplying cash so that assets do not need to be sold off or converted to cash. The trust loan is a mortgage placed against a piece of real estate held in the trust. Unlike a traditional mortgage, a trust mortgage loan is typically a short term loan. Once the assets of the trust are distributed, the beneficiary who inherited the real estate with the trust mortgage placed on it would refinance the trust mortgage with a conventional mortgage or payoff the mortgage.
Why Is An Equal Distribution Important?
When it comes to a trust distribution, an equal distribution can be important for a variety of reasons. Often times there is language in the trust that requires an equal distribution of the assets in the trust be made to beneficiaries. If the trust only contained cash, it would be easy to accomplish this. Unfortunately, most trusts that contain real estate do not have cash or other assets sufficient to create an equal distribution. In this situation, either the real estate must be sold or a mortgage must be taken out on the real estate to infuse the trust with cash. A trust loan is almost always the least expensive of the two options. Sometimes, more importantly, it also allows a beneficiary to keep a family home in the family.
Another important reason for the equal distribution of a trust is to meet the requirements of California Proposition 58. Prop 58 allows a child who is inheriting a home from a parent to avoid property tax reassessment on that home. This passes the low proposition 13 protected tax base from a parent to a child. Often times when the home is held in a trust, an equal distribution is required if a Proposition 58 exclusion from reassessment is to be granted by the County Tax Assessors office. In fact, the majority of trust loans that we provide are specifically for this reason. Our clients save on average over six thousand dollars per year in property tax savings by avoiding reassessment.
Do All Lenders Loan To Irrevocable Trusts?
No, in fact very few lenders are willing to lend to a trust, let alone an irrevocable trust. Typically when a home is held in a trust, a conventional lender will require that the property first be removed from the trust before they will lend on it. When a trust is revocable, this may not be an issue since the home can be added back into to trust once the mortgage process has been completed. Once the trust becomes irrevocable, often times the ability to do so is no longer possible and a lender who can lend to Irrevocable Trusts will be required.
When the requirements of Proposition 58 need to be considered, the situation can become even more complicated. Proposition 58 requires that the acquiring beneficiary of the real estate makes no personal guarantee on the trust loan or trust mortgage. Doing so would be perceived as a sibling to sibling transfer of real estate as opposed to a parent to child transfer and would likely jeopardize the exclusion from property reassessment. Commercial Loan Corporation is one of the only lenders in California that provides Irrevocable Trust Loans with no personal guarantee requirements. We work directly with Trust Administrators, Trustees, Beneficiaries, Attorneys and Property Tax Consultants. If you require a Trust & Estate Attorney or Property Tax Consultant to assist you with Proposition 58, we can refer you to an expert to assist you.
Is A Trust Loan Less Expensive Than Selling A Home?
Yes, in almost all cases a trust loan is far less expensive than selling a home. Additionally a trust loan takes less time to complete than it takes to sell a home. We can complete a trust loan in as little as 10 business days. That means beneficiaries can get more money and get their funds more quickly. When you consider the ability to take advantage of the Proposition 58’s exclusion from reassessment, the savings grow even further.
We specialize in loans to Irrevocable Trusts. If you or a client are in need of a trust loan or have questions about loans to an irrevocable trust, please call us at 877-464-1066. We will provide you with a free benefit analysis and answer any question you may have.
About California Proposition 13 Property Tax Information
About Proposition 13
California Proposition 13, also known as the People’s Initiative to Limit Property Taxation was an amendment of the Constitution of California enacted in 1978. California Proposition 13 made it so that the maximum amount of any tax on real estate shall not exceed one percent of the full cash value of such property and additionally restricted annual increases of assessed value of real estate to an inflation factor, not to exceed 2% per year.
Proposition 13 also prohibited reassessment of a new base year value except in cases of change in ownership, or completion of new construction. Later, in 1986 Californian’s passed Proposition 58 which also excludes from reassessment transfers of real property between parents and children, with certain limitations.
Commercial Loan Corporation specializes in helping clients who inherit properties qualify for Proposition 58 and avoid property tax reassessment when a third party loan is needed to equalize the distribution of a trust or estate. This allows you to keep a parents low Prop 13 tax base and save potentially thousands of dollars a year in property taxes. In fact, our average client saves over $6,000 a year in property taxes.
If you are inheriting home from a parent and are interested in keeping their Proposition 13 tax base, please call us at 877-464-1066.
Non Pro Rata Distribution Loans For Trusts and Estates – Call Commercial Loan Corporation at 877-464-1066
Non Pro Rata Distribution Loans For Trusts and Estates
Commercial Loan Corporation is one of California’s leading providers of loans to trusts and estates. Our specialized mortgage infuses a trust or estate with cash so that a non pro rata distribution can be made. A non pro rata distribution occurs when each heir or beneficiary receives an equal proportion of the entire estate or trust distribution but not of each asset. When a trust or estate does not hold sufficient cash assets, our loan provides the trust or estate with the cash needed to equalize the distribution or payout of the estate. This allows one of the beneficiaries or heirs to keep an inherited home and take advantage of the Proposition 58 tax benefit; which allows the California Proposition 13 protected low tax base from their parent to be transferred to the child who is inheriting the home.
On average our Non Pro Rata Trust Distribution and Probate Estate Distribution Loans save clients over $6,200 per year in property taxes. Our process is quick and easy. In fact we can often times complete a non pro rata loan in as little as 7 business days. Our loan is made directly to the trust.
If you, a family member or a client that you represent requires a California Proposition 58 Non Pro Rate Distribution Loan, please call us at 877-464-1066. Even if you are attempting to distribute and irrevocable trust, we have loan programs that can assist you. We can answer any questions you have on our non pro rate distribution loans and provide you with a free cost benefit analysis to see if one of our trust and estate loans makes sense for you.
California Proposition 58 Avoiding Property Tax Reassessment – Call 877-464-1066 For Assistance
California Proposition 58 Property Transfer & Avoiding Reassessment
California Proposition 58 provides California property owners with the ability to transfer real estate and a low property tax base between a parent and child. There are requirements to qualify for the benefits of Prop 58 and limitations to the benefits granted. Thanks to the assistance of Michael Wyatt who worked in the Orange County Tax Assessors office for nearly 25 years, we have compiled a list of some of the most common mistakes made when filing for an exclusion from property value reassessment and misconceptions about how California’s Proposition 58’s Parent to Child Transfer works. The following information is not legal advice. Every situation is different and we highly recommend that you contact an attorney or property tax consultant before taking any action. If you require assistance, please call us at 877-484-1066 and we can place you in contact with a qualified party to help you.
Commercial Loan Corporation is one of only a few California lenders in existence that provides loans and mortgages to trusts and estates. These trust loans allow for a Proposition 58 parent to child transfer to be granted by providing the cash needed for the trust to make an equal distribution to all beneficiaries. If you would like more information on our trust and estate loan programs, please call us at 877-464-1066 and we can answer any questions you may have and also provide you with a free Trust Loan Benefit Proposal. The proposal will calculate how much you may be able to save by taking advantage of the California Proposition 58 Parent to Child Exclusion for Property Tax Reassessment.
Proposition 58 Parent to Child Transfer Most Common Mistakes
1. Filing a claim for an exclusion from property tax reassessment too late
Filing for a Proposition 58 exclusion from property reassessment is time sensitive and may be an urgent matter. You have three years; or six months from a Supplemental Notice of Assessment or Escape Assessment. If you have exceeded this time frame you may still be able to petition for your benefits.
2. Not keeping track of each “eligible transferor’s” $1 million limit
Exceeding the $1 million limit can trigger a tax reassessment on a property. The million dollar limit is associated with the transferor and not with the property.
3.A parent owns a home. He or She creates an LLC in which the parent and his/her two children equally own 33.33% of the LLC. He or She then transfers the real property to the LLC.
The California Board of Equalization has very specific requirements for how the transfer of real estate must occur and the order it must occur in if a parent to child exclusion is to be granted. In this situation the parent must first add the children on to title and then apply for the parent to child exclusion prior to placing the home into the LLC. Before proceeding with a property transfer it is recommended that you contact a Property Tax Consultant such as Michael Wyatt if you have any questions or concerns regarding your Proposition 58 Parent to Child transfer eligibility and to make sure that it is not jeopardized.
4. Filing a claim where the transferred property will be assessed at its current market value where its market value had fallen below the transferor’s original Proposition 13 factored base year value.
It is very rare in California, but in some extreme situations of declining property value, it may not be of benefit to file for an exclusion from property reassessment. Call us at 877-464-1066 and we can help you determine if filing for your Property 58 exclusion or taking out a trust loan is beneficial for you and how much you may be eligible to save in property taxes.
5. A person over 55 sells his/her long-time original residence to his child. He/she first applies for and is granted the Parent-Child Exclusion. He/she then buys a replacement residence and applies to transfer the base year value under Proposition 60 to his or her replacement property.
After transferring an interest in the property to the child, the parent is no longer eligible to qualify for the California Proposition 60 benefit. California Proposition 60 requires that the original residence must be “sold” to qualify. By previously qualifying for the Prop. 58, the property is viewed as a transfer and not as a sale of the original residence.
6. A person owns several low-value small condominiums. He or she also owns several high-value apartment complexes. He or she transfers these condominiums to a child and applies for and is granted the Parent-Child Exclusion, thereby reducing the $1 million limit for the apartment complexes.
California Proposition 58 limits how much real estate can be transferred from a parent to child while still avoiding reassessment. In a complicated situation where several pieces of real estate are involved with multiple child beneficiaries; it may make sense to consult a property tax consultant. Doing so may help you maximize the benefit received from a parent to child transfer while adhering to the Proposition 58 transfer limits.
7. Two parents own real estate through the medium of their trust. The father dies in 1995. The mother dies in November 2017. The successor trustee files the Parent-Child Exclusion claim, and only reports the mother’s $1 million. The trustee forgets to also include and report the father’s $1 million, to get a total of $2 million.
California Proposition 58 permits each parent with property ownership to transfer $1 million in property value, allowing their child beneficiary to avoid property tax reassessment.
8. A trust agreement specifies that after a mother passes away, her trust shares are to be distributed equally to her three children, A, B, and C. The children decide that A is to get the real property, and B & C wish to get cash, but the trust does not have equal portions of real estate and cash for each child. The children contact a conventional institutional lender. The loan officer says they don’t lend to a trust. The loan officer advises the family to first take the real property out of the trust. The lender will then loan money to A so that B & C can receive cash.
Once the property is taken out of the trust, the distribution has been made with out an equal distribution occurring and child A will only be eligible for a 33% exclusion. In order to get the full exclusion, a 3rd party loan must be made directly to the trust with no personal guarantee from a beneficiary. Once the trust has received the funds from the loan, an equal distribution of equity in the real estate to child A and cash to child B & C can be made allowing for a 100% exclusion. Commercial Loan Corporation is one of just a few California lenders that will lend directly to a trust with no personal guarantee from a beneficiary, allowing a child inheriting a property to qualify fro a Proposition 58 exclusion from reassessment and keeping a parents low Proposition 13 property tax base.
9. Sending an incomplete request package to the Assessor, delaying the granting of Parent-Child benefit.
Depending on the complexity of the trust or estate, the County may require a variety of supporting documentation in order to grant a Proposition 58 parent to child transfer property tax exclusion for reassessment. If the submitted package is incomplete or not filed correctly, the request will be rejected. We advise that you contact a California Property Tax Consultant such as Michael Wyatt or an Attorney if you are unsure if you are filing the request properly. Call us at 877-464-1066 and we can put you in contact with a qualified attorney or property tax consultant to assist you.
10. Failing to included subsequent amendments and restatements along with a copy of the trust when submitting your request for a California Proposition 58 parent to child transfer exclusion.
When submitting trust documentation to the County, it is important to include the entire set of trust documents. Not including any existing amendments or restatements may result in a rejection of the request.
11. Not including a copy of death certificate for one of children/heirs listed in the trust agreement who has passed away prior to distribution.
When submitting documentation to the County for an exclusion from reassessment, it is important to include supporting documents as well. The County will require evidence to support the claims made in the request form. Some of these documents may include death certificates, evidence of a third party loan and trust documentation.
If you have any questions or require assistance, please call us at 877-464-1066 and we will do our best to assist you!
When you are considering keeping an inherited home from a parent and need to borrow money to buyout siblings or beneficiaries, it is important to make sure that it makes financial sense to do so. To assist you in doing so, we created the Commercial Loan Corporation Trust & Estate Loan Benefit Calculator.
Our trust and estate loan benefit calculator will help you quickly and easily determine if it makes sense to apply for a Proposition 58 exclusion from reassessment and take out a trust or estate loan. The loan benefit calculator compares your property tax savings to your estimated loan expenses and determines approximately how long it will take to recover those costs. If you plan on keeping the home longer than it will take to recoup the fees, then the loan is of benefit; if not then it would make more sense to not conduct the loan.
At Commercial Loan Corporation we specialize in assisting clients with the financing they need to keep a parents low property tax rate on an inherited property. Transferring a Parents of Grandparents property tax rate can be a extremely beneficial; in fact, on average we save our clients over $6,000 per year in property taxes. Taking advantage of the California Proposition 58 property tax benefits can be very complicated and we always advice that you use the services of a qualified Attorney or Resident Property Tax Specialist. With so much potential property tax savings on the line, you want to make sure that all of the rules are followed and that all of the documents are processed correctly. Failing to do so may disqualify you from an Exclusion From Property Tax Reassessment.
Michael Wyatt is a residential property tax specialist and specializes in helping clients preserve a parents low Proposition 13 protected property tax rate when a home is transferred or inherited. Often times he works with clients where the inherited real estate is contained in a trust or is part of an estate. It can be a very complex matter. If the property is not transferred appropriately or the financing is not done in accordance with California law, you may become ineligible to retain a parents property tax base rate and the home may be reassessed at current market value. We have worked with Michael Wyatt’s Property Tax Consulting Firm on several occasions and highly recommend him.
Michael Wyatt Property Tax Consulting works with the clients of attorneys, CPAs, financial planners, and real estate professionals to minimize real property tax assessments before or after transactions involving the transfer or purchase of real estate.One of the reasons why Michael Wyatt’s services are so valuable when it comes to keeping a parents low property tax rate is that he formerly worked for the Orange County Tax Assessor’s Office for almost 25 years. So he has the first hand experience to make sure you obtain the tax savings that you deserve. Prior to becoming a California Residential Property Tax Consultant, Michael worked as a Legal Analyst at the County Tax Assessors Office. During that time, Michael observed many real estate transactions that had undesired results due to property owners either never consulting with counsel, or advisers were not familiar with property tax law and its consequences. Michael Wyatt became a Property Tax Consultant in order to help advisers and their clients avoid those unintended results, and plan and structure their real property transactions to achieve their goals.
If you are in need of Trust or Estate financing or are interested in preserving a parents low property taxes on an inherited home, please call us at 877-464-1066 so that we may assist you. We can help you put together a plan of action and review your potential property tax savings with you.
Dealing with Trusts and Estates can be a complicated matter. It can go from complex to incomprehensible if you do not understand the terminology. To help you better understand, we have compiled a list of some of the most common terms used in trust and estate matters to assist you. If you need any additional clarification, we are here to assist you. Please call us at 877-464-1066 for any needs you may have.
Common Terms For Trusts And Estates
Appointer – The appointer is the person who can appoint a new trustee or remove an existing one.
Appointment – The act of appointing, giving an asset from the trust to a beneficiary; or the name of the document which gives effect to the appointment. The trustee’s right to do this, where it exists, is called a power of appointment. Sometimes, a power of appointment is given to someone other than the trustee, such as the settlor, the protector, or a beneficiary.
Beneficiary – A beneficiary is anyone who receives benefits from any assets held by the trust.
Bridge Loan – A bridge loan is short term financing that is typically paid back or refinanced. Often times the term on a bridge loan can range from 3 to 12 months.
Estate Planning – The process of arranging ones property and affairs to insure their disbursement in the most effective way possible.
Power of Attorney – A power of attorney is a legal instrument that empowers another person as agent to deal with one’s property and affairs.
Executor – The one nominated in a Will and or appointed by Probate Court to manage and distribute a decedent’s estate in accordance with the terms of the Will.
Fiduciary – A fiduciary is a person to whom property or power is entrusted for the benefit of another.
Proposition 13 – California Proposition 13 is a constitutional amendment enacted in 1978. The Proposition 13 Amendment limits the tax rate increase that can be charged annually on real estate in California. The proposition restricts the annual increases of assessed value of real property to an inflation factor, not to exceed 2% per year. California Proposition 13 also prohibits 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.
Proposition 58 – California Proposition 58 allows for the exclusion for reassessment of property taxes on transfers between parents and children. If the sale or transfer of real property 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. Proposition 58 allows the new property owner to avoid property tax increases when acquiring property from their parents. The new owner’s taxes are instead calculated on the established Proposition 13 factored base year value, instead of the current market value when the property is acquired from the parent.
Protector – A protector may be appointed in an express, inter vivos trust, as a person who has some control over the trustee usually including a power to dismiss the trustee and appoint another.
Settlor – This is the person or persons who creates the trust. They may also be known as a Grantor.
Trust – A trust is an arrangement in which ownership of assets is transferred to a Trustee, who thereafter has a fiduciary duty to distribute the trusts assets to the beneficiaries of the Trust.
Trust Deed – A trust deed is a legal document that defines the trust such as the trustee, beneficiaries, settlor and appointer, and the terms and conditions of the agreement.
Trust Distributions – A trust distribution is any income or asset that is given out to the beneficiaries of the trust.
Trustee – A person, corporation who administers a trust. A trustee is considered a fiduciary and owes the highest duty under the law to protect trust assets from unreasonable loss for the trust’s beneficiaries.
If you require a third party bridge loan to take advantage of the benefits of proposition 58, please call us at 877-464-1066 so that we may assist you.