A property that is a candidate for the parent to child exclusion under Proposition 19 will almost always be held in a trust or an estate. If there is only one beneficiary or all of the child beneficiaries are keeping the property together; the process is fairly simple. If there are multiple child beneficiaries and one or more will not be taking the property as part of the distribution; there are some requirements that must be met if you would like to gain a full exclusion from property tax reassessment. The most important requirements are:
The distribution of the assets must be equal.
The will or trust may not have language prohibiting a non-pro-rata distribution (a non-pro-rate distribution permits the administrator or trustee to divide the assets among the beneficiaries using different assets. A pro-rata distribution means each beneficiary receives their entitled percentage of each asset).
In the event there are not enough liquid assets to make an even distribution, the irrevocable trust or probate estate can obtain an Equalization Loan from a 3rd party to equalize the distribution. Here is an example of how an equalization loan works. For this example the family home is the only asset of the trust or estate and is valued at $750,000. Let’s assume that there are no liens on the property, there are three child beneficiaries, only one child will keep the property and the other two beneficiaries want cash:
The trust or estate would be valued at $750,000
Each beneficiary would be entitled to $250,000 ($750,000 divided by the 3 children)
The trust or estate would obtain an Equalization Loan in the amount of $500,000 Beneficiary 1 would receive $250,000 in cash Beneficiary 2 would receive $250,000 in cash Beneficiary 3 (Acquiring Beneficiary) would receive a $750,000 property with a $500,000 loan against it or $250,000 in equity ($750,000 minus $500,000)
This is a simplified example but gives you an idea of how the equalization loan works. The actual calculations may be different when factoring in loan costs and other expenses of the trust or estate. Most lenders are unwilling to lend to an irrevocable trust or an estate involved in probate, but we specialize in it and helping clients qualify for California Proposition 19 and providing Equalization Loans. If you, a family member or a client is in need of a Proposition 19 Equalization Loan to avoid reassessment on an inherited home, please call us at (877) 464-1066.
We are California’s #1 Trust and Estate Lender. We have helped over 500 clients keep a parent’s low property tax base on an inherited home. Our average client saves over $6,550 a year in property taxes by avoiding reassessment. We provide loans to irrevocable trusts and probate estates. A trust and estate loan allows for an equal distribution to be made so that you can qualify for a California Proposition 19 Parent to Child Transfer and avoid property tax reassessment on an inherited home. This enables one child to keep the home with the parent’s low property tax base while the other child beneficiarie(s) receive an equal share of cash.
Call us today at (877)464-1066. We can provide you with a free cost benefit analysis which will let you know how much you can save by avoiding property tax reassessment. We can answer all of your questions and work with your attorney to help you qualify for a Proposition 19 parent to child transfer and exclusion from property tax reassessment. We can provide financing in as little as 10 business days and help you and your family save tens of thousands of dollars by avoiding costly realtor fees. Our trust loans do not carry a prepayment penalty, so you can pay down or pay off your trust loan as quickly as you like.
Trust Loans and the Parent to Child Exclusion for Reassessment
When California Proposition 19 went into effect on April 1st, 2021, it replaced Proposition 58. California Proposition 58 previously controlled how a person inheriting a home from a parent could avoid property tax reassessment. Under the newly passed Proposition 19, a few of the rules for obtaining an exclusion from reassessment have changed.
Under Proposition 58, a child inheriting a home from a parent could apply for an exclusion from property tax reassessment with no value limitation, providing it was a primary residence. With Prop 58 you could also keep an investment property with a 1 million dollar exclusion per parent. Under Proposition 19, there is a limit of the current taxable value plus $1,000,000 on a primary home. Additionally, Proposition 19 eliminated the ability to avoid reassessment on an inherited home that will not be used as your primary residence.
There are additional requirements when it comes to receiving an exclusion from reassessment on an inherited home. One key point for the Assessor’s Office is to show that everyone receives their equal share according to what the trust states. If an equal distribution is required, a loan cannot be made to the trust by any of the beneficiaries who intend on keeping the real property. Doing so would be considered a sibling to sibling buyout resulting in a transfer between beneficiaries rather than a transfer from parent to child. For example, if the only asset in the trust was a home worth $900,000 and one of the three child beneficiaries wanted to keep that home, a loan would need to be made to the trust for $600,000. In this situation the two beneficiaries who did not want the home would each receive their $300,000 cash and the other child receives the home with $300,000 equity left in it after the trust loan was made.
When there are insufficient cash assets for an equal distribution to be made from an irrevocable trust, a person will often require the assistance of a trust and estate lender. As documented by the California Board of Equalization, the acquiring beneficiary may not utilize their own funds or make a personal guarantee on the loan. Doing so would create a sibling to sibling buyout, disqualifying them for the full parent to child transfer exclusion. The loan will need to be made directly to the trust, without first removing the property from the trust or requiring a personal guarantee from the acquiring beneficiary. A qualified trust and estate lender will make a loan directly to the trust, providing enough cash for the equalized distribution to be made. The trust lender often works directly with an attorney or property tax consultant. A trust loan is typically a short term loan with no pre-payment penalty. Once the property has been transferred from the trust to beneficiary, the loan can be paid off or refinanced into a conventional mortgage.
If you, a family member or client is in need of a loan to a trust or irrevocable trust, you may contact us at (877) 464-1066. One of our Trust Loan Account Managers can answer any questions you may have on the trust loan process and put you in contact with a Qualified Trust & Estate Attorney or California Property Tax Consultant in your area if you are in need of assistance. We will also provide you with a no cost trust loan benefit analysis that will estimate how much you can expect to save by using a trust loan to avoid property tax reassessment on an inherited home.
Trust Loans, Estate Loans, Probate Loans & Loans to Prepare A Home for Sale
Commercial Loan Corporation is a one stop shop for all of your Trust & Estate Loan needs. Unlike other lenders, we specialize in helping clients who need a loan for a home in an irrevocable trust or currently in probate. Most lenders refuse to lend on these properties, but that is what we specialize in. Not only do we provide trust loans and probate loans, we can also lend funds to prepare a home for sale. In addition to lending services, we can also help you get an immediate cash offer for a home you wish to sell. We can provide you with a free assessment of all of your options so that you can determine which makes the most sense for you.
Trust Loans
Our trust loans are specially designed to help beneficiaries and heirs take advantage of the California Proposition 19 parent to child property tax transfer and avoid property tax reassessment on an inherited home. We lend directly to irrevocable trusts and estates in probate, with no personal guarantee requirement from the beneficiary inheriting the home. This meets the California Board of Equalization equalized distribution requirement and avoids a sibling to sibling buyout, which can put your exclusion from property tax reassessment at risk. The loan process is quick too. We can fund a trust loan in as little as 7 business days. Our trust loans help clients avoid costly realtor fees and saving on average over $6,500 in property taxes each year by avoiding reassessment.
Probate Loans
Much like a trust loan, a probate loan is typically used to help a client avoid property tax reassessment on an inherited home. The key difference is that the home is in the probate process and opposed to locked in an irrevocable trust. We can help you simplify a complex situation and secure your low property tax base. We will answer all of your questions on the process and help you determine if a probate loan is right for you.
Trust & Estate Loans to prepare a home for sale
In some situations a trust or estate would like to sell the home for top value but does not have the funds needed to make repairs or prepare the home for sale. We make loans to trusts and estate so that they can be rehabilitated, repaired or remodeled; allowing you to fetch top dollar when it is sold. In some cases speed is of the essence and the client wants to get a quick cash offer for the home and avoid a potentially length home sale process. We have contacts throughout California who can assist you and and in some cases purchase your home in as little as 10 business days.
If you are inheriting a home and have questions about a trust loan, probate loan or getting a cash offer for a home; please call us at (877) 464-1066. We can answer all of your questions on the process and provide you with a free quote and benefit assessment.
Join Commercial Loan Corporation and have your Proposition 19 Trust Loan questions answered at the USC Gould Trust and Estate Conference on 11/9/2022.
Come and meet Tanis Alonso-Kluever and Thaddeus Farrell at the USC Gould Trust and Estate Conference on November 9th, 2022. This years trust & estate conference will be held at the Westin Bonaventure Hotel. Commercial Loan Corporation is sponsoring the event and will be on hand to answer all of your questions on California Proposition 19 Parent to Child Transfers and our specialized Trust Loans to assist clients in qualifying for a full exclusion from property tax reassessment.
This years special keynote speakers include Dr. Bonnie Olsen and retired Judge Paul Suzuki. The speakers will discuss the development of the Judicial Guardianship Evaluation Worksheet, a tool for probate judges to evaluate relevant factors in assessing the propriety and scope of conservatorships for older adults. They will complete the 45-minute presentation discussing how the Worksheet may impact consideration of evidence in probate matters. Here are some details about the upcoming USC Gould Trust & Estate Conference:
When?
The 48th Annual Trust and Estate Conference will take place on Wednesday, November 9, 2022, at the Westin Bonaventure Hotel and Suites in downtown Los Angeles.
Why attend?
For 48 years, USC Gould’s Trust and Estate Conference has been delivering practical and real-life solutions from speakers with a proven track record of addressing unexpected problems in estate planning, probate, and trust administration. The Conference typically attracts over 500 of your peers for unrivaled networking and learning opportunities from both the speakers and your professional colleagues.
Who should attend?
The Conference is specially tailored for trust, estate planning, probate and elder law professionals including attorneys, paralegals, trust officers, accountants, financial institution executives, private professional fiduciaries, wealth management professionals, fiduciary officers, underwriters and insurance advisors.
What’s included?
Registration includes all sessions, continental breakfast, networking breaks, luncheon presentation, continuing education credit, and print and downloadable copies of the practical Conference Syllabus, including the popular Resource Guide, a Trust and estate Professional Directory covering Los Angeles, Orange and San Diego counties.
Free WiFi will also be available for attendees at the Conference!
If you have questions on California Proposition 19 prior to the conference or are currently in need of a trust loan, please call us at (877) 464-1066 so that we may assist you. If you would like to signup for or find additional information on the 2022 USC Gould Trust and Estate Conference, please visit here. Or view the PDF version of the brochure here: USC Gould Trust & Estate Brochure
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.
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.
Finding financing for Probate Estates and Irrevocable Trusts in California can be complicated. Most lenders are unwilling to lend on a property until the estate has been settled. The same problems exist for real estate held in an Irrevocable trust; conventional lenders will require the home be removed from the trust in order to provide financing and doing so is likely to jeopardize your ability to take advantage of the Proposition 19 parent to child transfer exclusion. Our private money loans help solve these complex issues. We lend to probate estates and directly to irrevocable trusts, providing the cash needed for trust administrators and beneficiaries to keep a family home and transfer a parents low property tax base.
We are California’s top Trust & Estate lender and have saved Californian’s over $7,800,000 in property taxes by avoiding property reassessment. We specialize in providing clients with the financing needed to qualify for California Proposition 19’s parent to child property tax transfer. Our average client saves over $6,800 each year in property taxes and if you are inheriting a home from a parent, we may be able to assist you as well. We offer competitive rates, have no personal guarantee requirements, offer affordable interest only payments with absolutely no no prepay penalties or minimum interest requirements. We are here to help!
Call us at (877) 464-1066 and we can assist you or your client with a loan to a probate estate or irrevocable trust. We will help you determine your property tax savings, provide you with a free cost benefit analysis and answer any questions you may have on the process.
Recently PropertyTaxNews.org conducted an interview with Commercial Loan Corporation Trust & Estate Loan Account Executive Thad Farrell on the benefits of California Proposition 19 and a loan to an irrevocable trust. Here are some of the highlights from that trust loan interview.
Mr. Thaddeus Farrell is an Account Manager at Commercial Loan Corporation in Newport Beach, California. He arrives from a long, successful career in mortgage banking and is considered a rising star in the Trust Loan marketplace. We were fortunate to have Mr. Farrell agree to share his views on property tax transfers, California Proposition 19, and irrevocable trust loans for new homeowners and beneficiaries in California.
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Property Tax News: As an account manager with Commercial Loan Corp who do you generally communicate with, on a daily basis?
Thaddeus Farrell: I usually talk to attorneys, licensed fiduciaries, trust or estate administrators, Conservators, trustees, beneficiaries and executors. Mostly regarding their need to keep a parents low property tax rate on an inherited home. Frequently, I follow up with attorneys and work with them during the trust loan process. Part of my job is to help them help their clients. In terms of driving interest from lawyers or CPAs I may be talking to. It’s case by case, and timing, as to what an existing client is in need of at this or that very moment.
Property Tax News: In your opinion sir – what is the most important way Proposition 19 helps families inheriting property in California?
Thaddeus Farrell: Overall, to assist families with their property taxes, transferring property taxes through Proposition 19 as well as helping with buying out co-beneficiaries’ inherited property shares.
Property Tax News: What is it precisely that these California families are trying to accomplish?
Thaddeus Farrell: Simply put, to transfer their parents’ low property tax base. Look at it this way – property reassessment can cripple a family financially. I look at it like this – expenses are a part of life, and when you inherit a family home, if the property is reassessed at current rates, those expenses will usually go sky high. Most middle class people can’t afford to pay that type of tax hike. They want to take advantage of Proposition 19 and a trust loan, transferring CA Property Taxes from a Parent to an Heir tax break, to avoid property tax reassessment, and move into an inherited home within a year as a principle residence, which was their parents’ principle residence formerly protected by Proposition 58 and Prop 13.
Property Tax News: How does Commercial Loan Corp fit in, put very simply?
Thaddeus Farrell: We guide beneficiaries through a process that will maintain their parents’ low property tax base. Usually siblings that want to retain inherited property from parents come to us first, generally after being referred to us by a California Property Tax Consultant, Law Firm or a Trust and Estate Attorney. Middle class families that can’t afford to pay reassessed taxes on an inherited home… Which pretty much sums up most families these days!
Property Tax News: What do you discuss with these attorneys that you speak to about Proposition 19 and a trust loan saving their clients money on property taxes?
Thaddeus Farrell: I make it very clear right away with attorneys that siblings inheriting a home have two options. They can sell or keep their inherited property. In other words, your family has to make up their mind – what they want to do, sell or keep. Selling it is far more expensive. By keeping the home, each beneficiary receives approximately $15,000 extra in a cash trust distribution when compared to selling the home because they avoid costly realtor and real estate sale expenses. The child beneficiary keeping the inherited home winds up saving on average $6,200 in yearly property taxes.
Property Tax News: Is it really true that residents save that much?
Thaddeus Farrell: Absolutely! A realtor typically charges 6%, there can be costs to prepare the home for sale and closing costs such as title, escrow or assistance with buyer closing costs on top of that. If the property is reassessed – the cost can be very high.
Property Tax News: And we understand you treat everyone the same, regardless of their property’s value, or their net worth.
Thaddeus Farrell: That is correct. We extend the same commitment to everyone. I for one treat each customer like I would treat my brother or my sister. We have never had one unhappy customer in the last three hundred transactions I’m aware of. Five star reviews, five-star Google ratings, no complaints!
Property Tax News: Thad, if someone needs assistance with California Proposition 19, a bridge loan to make an equal distribution to an estate or a trust loan to an irrevocable trust, how can they contact you?
Thaddeus Farrell: They can contact us at (877) 464-1066; we are always happy to help.
Property Tax News: Great. Well, thanks for talking with us today.
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.
