Tag Archives: Proposition 19

Trust Loans

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Trust Loans

Trust Loans in California

What are Trust Loans?

Trust Loans or Loans to Trusts are loans made directly to a trust as opposed to an individual. With a conventional mortgage, a borrower applies for a loan and signs the loan documents personally guaranteeing the loan. With a trust loan it works a little different. Instead of a borrower guaranteeing the loan, the Successor Trustee will sign loan documents on behalf of the trust and the lender lends to the trust as opposed to a person. With a trust, usually a home is used as the collateral for the trust mortgage or trust loan. Often times there is no credit check, income verification or personal guarantee involved with a trust loan.

What is the purpose of a Trust Loan?

Most of the trust loans that we provide are to prepare a trust for distribution so that one of the trust beneficiaries can avoid property tax reassessment on an inherited home. California is one of the few states that provides a property tax security measure which prevents property taxes from increasing too rapidly. In California, Proposition 13 is what achieves this. California Proposition 13 caps the maximum increase of the assessed value of a home at 2% annually. This means that over a 10 year period, if your home doubled in value from $400,000 to $800,0000; you would only be paying property taxes on an assessed value of approximately $487,500 as opposed to the current market value of $800,000. In California, the typically property tax rate is 1% of the assessed value. So in the example above, it would mean an annual property tax savings of $3,125.

California Proposition 13 has been in effect since 1978. As you can imagine, since 1978 property values have increase significantly and Proposition 13 has kept the assessed values of many homes extremely low. In addition to preventing property taxes from increasing too rapidly, California has other laws to protect residents. Proposition 19, allows a parent to transfer a home to a child and avoid reassessment on that home if it is a primary residence. This is where a trust loan becomes very important. California Proposition 19 has specific requirements that must be met if a person inherits a home from a parent and wishes to avoid property tax reassessment on that home. One of those requirements pertains to trusts and estates. The California Board of Equalization requires that an equal distribution of assets be made to all child beneficiaries unless specific language exists in the trust. Information on this can be viewed here on the California Board of Equalization website When a trust is involved, a trust loan is likely the only way to accomplish an equal distribution.

Often times when a trust contains real estate, the home is by far the most valuable asset in the trust. When there are multiple beneficiaries in the trust, that often time means an equal distribution can not be made without cash being added to the trust. The trust loan resolves this issue by injecting cash into the trust while at the same time placing a lien or debt against the real estate. This allows for one child to inherit the home while other children receive an equal amount of cash, creating an equal distribution. Since the loan is made to the trust as opposed to the beneficiary, the child inheriting the home can qualify for the Proposition 19 exclusion from property tax reassessment. On average our clients save $6,500 a year in property taxes by avoiding property reassessment.

If you are inheriting a home and are interested in keeping a parents low property tax base, we may be able to help. We have assisted over 450 clients in avoiding property tax reassessment. We work with Trust & Estate Attorneys and Property Tax Consultants across California. Call us at (877)464-1066 and we can provide you with a FREE Trust Loan Benefit Analysis that will let you know if you may be eligible to avoid property tax reassessment and how much in annual property taxes a trust loan may help you save.

Free Continuing Legal Education Course – California Proposition 19

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California Proposition 19 Continuing Legal Education - Free for California Attorneys

California Proposition 19 Continuing Legal Education – Free for California Attorneys

Commercial Loan Corporation Now Offers Free Proposition 19 Continuing Legal Education Online for Licensed California Attorneys

Commercial Loan Corporation offers a 1 hour presentation on the use of Parent to Child Property Tax Transfers under Proposition 19, 58 and 193. The presentation covers the use of proper calculations when equalizing distributions and use of Proposition 19’s transfer of tax base provision. This California Prop 19 CLE presentation is approved by the California Bar for 1.0 MCLE credit. Our continuing legal education is offered completely free to Attorneys and Fiduciaries. Commercial Loan Corporation is a California Lender that specializes in lending to Trusts and Estates and has helped hundreds of clients retain a parents low property tax rate on an inherited home.

Commercial Loan Corporation is a licensed provider of continuing legal education for the state of California. This course covers California Proposition 19, Proposition 58 and third party loans to trusts and estates to facilitate an equal distribution. The course can be performed online and scheduled at a convenient time of your choice during the business hours of Mon-Fri 9am-4pm.

Please contact Commercial Loan Corporation at (877)464-1066 to signup for this free California Proposition 19 CLE today.

What is California Proposition 19?

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What is California Proposition 19?

Information of California Proposition 19 and Property Tax Transfers.

California Proposition 19

So what is California Proposition 19? Proposition 19 also known as the Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act, or Prop 19 for short is an amendment to the California Constitution that impacts state property tax laws and regulations. On November 3, 2020, California voters approved Proposition 19. In simplified terms Prop 19 is a Constitutional Amendment that imposes new limits on property tax benefits for inherited family property. Under Proposition 19, a child or children may keep the lower property tax base of the parent(s) but only if the property is the principal residence of the parent(s) and the child or children make it their principal residence within one year of receiving ownership. Additionally, Prop 19 allows homeowners who are over 55 years of age, disabled, or victims of a wildfire or natural disaster, to transfer their lower assessed property value of their primary home to a newly purchased or newly constructed replacement principal residence up to three times, or once per disaster. Proposition allows the property tax base may be transferred to a property located anywhere in the state of California.

California Proposition 19 Effective Dates

Information on Proposition 19 obtained at the California BOE Website:

Section 10 of article II of the California Constitution provides that a measure approved by a majority of votes cast takes effect on the fifth day after the Secretary of State files the Statement of the Vote for the election at which the measure is voted on, but the measure may provide that it becomes operative after its effective date.1 The language of Proposition 19 for both the base year value transfer provisions and the parent-child and grandparent-grandchild exclusion provisions have specified operatives dates, as follows:
• The base year value transfer provisions become operative on April 1, 2021.
• The parent-child and grandparent-grandchild exclusion provisions become operative on February 16, 2021.
Base Year Value Transfer
Beginning on and after April 1, 2021, section 2.1(b) of article XIII A of the California
Constitution provides that an owner of a primary residence who is over 55 years of age, severely disabled,2 or a victim of a wildfire or natural disaster may transfer the base year value of their primary residence to a replacement primary residence located anywhere in California that is
1 On June 5, 2018, the voters of California approved Proposition 71, which changed the effective date of ballot measures from the day after the election to five days after the California Secretary of State certifies the results of the election. See LTA No. 2018/068. 2 Revenue and Taxation Code (RTC) section 74.3(b) defines a “severely and permanently disabled person” as “any person who has a physical disability or impairment, whether from birth or by reason of accident or disease, that results in a functional limitation as to employment or substantially limits one or more major life activities of that person, and that has been diagnosed as permanently affecting the person’s ability to function, including, but not limited to, any disability or impairment that affects sight, speech, hearing, or the use of any limbs.”

California Proposition 19 Parent to Child Exclusion Chart.

California Proposition 19 Charts to help you better understand how the proposition may impact you can be found here. The following Prop 19 chart illustrates how the proposition differs from the previous Prop 58 and Prop 193 California legislation.

The California Proposition 19 Parent to Child Exclusion Chart

The California Proposition 19 Parent to Child Exclusion Chart

 

The Proposition 19 Base Year Value Transfer Chart

The Proposition 19 Base Year Value Transfer Chart

 

Assistance with the California Proposition 19 Parent to Child Transfer

Commercial Loan Corporation works with clients, Estate Attorneys and California Property Tax Consultants to help you qualify for a California Proposition 19 Parent to Child Transfer. We provide loans to Irrevocable Trusts and Probate that do not have sufficient cash assets. Our trust loan or probate loan allows for an equalized distribution to be made to all involved child beneficiaries without having a personal guarantee from the acquiring beneficiary.

If you require additional information on California Proposition 19 or if you are curious if you are eligible for the California Proposition 19 Parent to Child Transfer Benefit, we can assist you. We have helped hundreds of clients receive their benefit and save them over $6,500 per year in property taxes on average. Call us at 877-464-1066 and we will answer all of your questions. We can also provide you with a free benefit analysis and let you know how much you may be able to save in property taxes on an inherited home.

Additional California Proposition 19 Resources:

The full legislative information on California Proposition 19 – ACA-11 can be found here.
The California Proposition 19 Parent to Child Transfer Benefit Calculator

What is California Proposition 19? – PDF Download

Orange County Bar – Proposition 19 Trust Loan Presentation

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Trust and Estate - Proposition 19 Loans to Irrevocable Trusts

Trust and Estate – Proposition 19 Loans to Irrevocable Trusts

On March 7th, 2022, Tanis Alonso-Kluever will be providing a Continuing Legal Education presentation for the Orange County Bar Elder Law & Special Needs Section. Tanis is a Senior Account Executive at Commercial Loan Corporation and specializes in lending to Irrevocable Trusts and Estate so that her clients can qualify for California Proposition 19’s and Proposition 58’s parent to child transfer and avoid property tax reassessment. This presentation is approved by the California Bar for 1.0 MCLE credit.

In the presentation, Tanis will cover understanding the differences in law as they pertain to Parent to Child Transfers under Proposition 19, 58 and 193. Using proper calculations when equalizing distributions and use of Proposition 19’s “transfer of tax base” provision. We welcome any members of the Orange County Bar Association to sign up. Attached is the signup PDF.

Orange County Bar Association – Proposition 19 Loans to Irrevocable Trusts for Proposition 19

If you have questions on California Proposition 58 or Proposition 19, please call us at 877-464-1066.

Parent to Child Property Tax Transfer in California

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Parent to Child Property Tax Transfers in California

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.

Inheriting a Home in California – Property Tax Guide. Keeping A Parents Low Property Tax Base.

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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

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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.