A trust loan is commonly used to facilitate an equal distribution to the beneficiaries of an irrevocable trust. This is typically done in order to take advantage of the California Proposition 19 Parent to Child Property Tax Transfer which allows a child to keep a parents low proposition 13 property tax base on an inherited home.
This process, often involving a loan to an irrevocable trust, may also help resolve inherited property conflicts between siblings by quickly providing the needed cash for a trust distribution to occur as opposed to having to wait for a home to be repaired and then sold. Doing so also avoids costly realtor fees associated with selling a home which means that each beneficiary receives more money. As of February 2021, the popular Proposition 58 parent to child exclusion from property tax reassessment is now essentially the Proposition 19 parent to child exclusion. In some cases a child inheriting a home may still be able to qualify for Proposition 58. California Proposition 58 has basically morphed into the Proposition 19 property tax measure. Thankfully, California Prop 19 still enables most beneficiaries to buyout their co-beneficiaries’ shares of inherited property and avoid property tax reassessment in many situations.
In other words, it’s still possible to buyout a siblings portion of an inherited home and keep a parents low property tax base using California Proposition 19. The process is sometimes referred to as a transfer of property between siblings, a sibling to sibling property transfer or a parent to child transfer of property. In order to qualify for Proposition 19, an irrevocable trust or estate will often require a trust loan to meet the third party loan requirement enforced by the California Board of Equalization. This is most common when the trust or estate has insufficient liquid or cash assets in order for an equal distribution to be made to all child beneficiaries.
If you are interested in taking advantage of California Proposition 19 and avoiding property tax reassessment on an inherited home, call us at 877-464-1066. We can help you determine if a third party loan might be needed to provide the funds to equalize a distribution and buyout siblings.
Additional information on Proposition 19 can be found at https://propertytaxnews.org/