There are, as we all know, numerous reasons that California property owners support Proposition 13 and California Proposition 58. Proposition 13, passed by voters on June 6, 1978 protects individual consumer and corporate owners of residential and commercial real property from current property tax reassessment, with the exception of completion of new property construction and/or a change in property ownership. Proposition 58 was approved as a California constitutional amendment by voters on November 6, 1986 – to exclude transfers of real property between parents and children from property tax reassessment. Moreover, CA trust loans keep parents property taxes low, insuring that an even distribution can be made.
Generally, this gives adult offspring the ability to keep parents property taxes – in other words, to retain a parent’s lower Proposition 13 protected property tax rate. This frequently results in families saving literally thousands of dollars every calendar year. Moreover, these activities open up opportunities for companies like the Commercial Loan Corporation to help California beneficiaries and heirs who are middle class, not particularly wealthy, to qualify for Proposition 58 property tax benefits, by providing bridge loans to trusts and probate estates in order for an even distribution to be made for these heirs and beneficiaries. This is precisely how trust loans keep parents property taxes low in California.
Since 1978, Proposition 13 has saved California taxpayers over $528 billion – which has saved every taxpayer in California more than $60,000. The 1978 Proposition 13 tax shelter finally provided residential and commercial property owners in California with tax relief that has proven, year after year and decade after decade, to be reliable, predictable and secure.
California home owners and renters all enthusiastically support Proposition 13, being able to reliably avoid property tax reassessment at current tax levels; as well as Proposition 58, with respect to parent to child transfer of property, and parent to child exclusion from property reassessment… and Proposition 193, involving grandparent to grandchild property transfers, when inheriting property taxes – which has collectively enabled families to comfortably transfer real property from parent to child, and keep parents property taxes, without being reassessed with constant property tax increases.
Renters in California support Proposition 13, due to the fact that most residential and business renters are aware that as long as their landlord’s property taxes remain low, their rent is likely not to go up. Whereas if landlords’ taxes in California go up – we can predict with mathematical certainly that business rents will follow. Landlords will more or less have no choice but to increase their tenants’ rents.
Naturally, this would affect stores, gas stations, offices, industrial facilities, and so on – and that would ultimately affect the cost of food, of business goods and services; of gas; so forth and so on. Everything would go up. And consumers would be hit hard. Which is basically why renters in California support Prop 13, even if they’re not property owners themselves. In fact — why mostly everyone in California with a sense of community and fairness wholeheartedly supports California Proposition 13, 58 and 193.
CA Proposition 58, Loans to Trusts and Property Tax Breaks
Beneficiaries in every state in America should have property tax measures like California does, and be able to use trust loans & Proposition 58 to equalize property shares sold by co-beneficiaries; and by all rights be able to transfer parents property taxes, when inheriting property taxes in California, to themselves at the low rate their respective parents used to pay, whenever inheriting property taxes in California on gifted or inherited property — either residential or business real estate. In all states, and especially in high tax states like New York, Texas, Massachusetts and Pennsylvania.
If people want to march on something, egregious property tax rates in most of this country would be worth marching for. Trust loans & Proposition 58 in California, and by now institutionalized California tax breaks from Proposition 13, saves beneficiaries a great deal of money; avoiding property tax reassessment on the transfer costs, plus the low base rate from parents, from CA Proposition 13.
Lawmakers in every state can, and should, pass property tax relief bills that make sense, like CA Proposition 58 and 193, enabling low raxes on property tax transfer from parents and grandparents when inheriting a home, for example… as well as maintaining a low Proposition 13 tax base from parents, forever. California trust loans are used to resolve inherited property conflicts, between beneficiaries, working alongside CA Proposition 58 – enabling co-beneficiaries to sell shares of inherited property, a beneficiary buyout of sibling property shares… while avoiding property tax reassessment. Generally buying out a sibling’s share of an inherited house – as real estate lawyers call it, “transfer of property between siblings” or “sibling to sibling property transfer” – lending money to an irrevocable trust – from a lender specializing in trust loans and CA Proposition 58, from A to Z.
And likewise, inheriting property taxes on that home in accordance with parent to child transfer or parent to child exclusion, from present day property tax rates, avoiding property tax reassessment simply to keep property taxes low, giving beneficiaries the ability to utilize trusts for personal estate use and benefit – for all Americans; not just for the VIPs and the wealthy. California is the model every American state should mirror when it comes to property tax relief.
If this were in fact the case, all Americans, in every state, would be able to enjoy a bit more of a sense of genuine financial comfort, with a greater sense of security, that most people associate with their home… Placing this sense of “home security” under threat year after year, by jarring home owners and business property owners’ feeling of security, where their home is concerned, with unexpected, seemingly arbitrary property tax hikes on what is most Middle Class people feel is their most valuable asset, and the very foundation of what little security Middle Class Americans have these days.
Middle Class Americans as a rule do not have a seven-figure bank account or eight-figure net-worth “portfolio” that helps them sleep better at night! In fact, a recent 2019-20 financial report tells us that most Middle Class Americans have trouble coming up with $400 in cash to deal with a personal emergency! Bearing in mind that unreasonable taxes on their home – what they consider their base asset for personal security, along with their health and income – might intrude on their security at any time – unless controlled by iron clad property tax relief, such as the 1978 CA Proposition 13 tax break, and the 1986 CA Proposition 58 property transfer tax measure
This automatically made unpredictable, arbitrary tax hikes, imposed by politicians with questionable motives and goals, impossible to impose on all Californians. Property tax relief is not just a dream, as many critics in other states might suggest. California accomplished it. Why not every other state as well?
If you are seriously considering a loan to a trust in California, to take advantage of California Proposition 58, our Senior Editors would advise you, without hesitation, to look into Commercial Loan Corp at 1-877-464-1066 in Newport Beach, CA. This firm is one of the only California lenders that not only specializes in assisting beneficiaries with Proposition 58 – unlike conventional lenders, they are also able to lend directly to an Irrevocable Trust with loans of any size and, unlike other lenders, surprisingly, they treat all their clients like V.I.P accounts – regardless of the size of their loan, or property value.
Improving Your Family’s Yearly Financial Security With Lower Property Taxes…
When families inheriting property are experiencing conflicts between beneficiaries who wish to retain their inherited property and siblings who want to sell their property shares – a loan to a irrevocable trust is frequently the answer.
Many property owners can also be qualified to apply and keep a significantly lower tax rate on a secondary dwelling as well; if they are 55+ and retaining the initial inherited property for 2 years or longer.
Steps, rules & regs for the trust loan process – in conjunction with California Proposition 58 – are typically as follows:
1. Determination of who will keep the property 2. Determination of the loan amount 3. Loan to trust/estate is implemented 4. Trust lender equalizes cash distribution to beneficiary or beneficiaries 5. Property is transferred into the acquiring beneficiaries name 6. Parent child exclusion is filed, avoiding property tax reassessment 7. Five to seven day funding turnaround 8. The trust loan is repaid, concluding a win-win family arrangement 9. No Up-Front Costs 10. No Hidden Fees
An Alternative Financial Solution for Beneficiaries:
The Anderson‘s decided they would allow Marie to keep the inherited home from their late mom, as long as her brother Don could receive enough cash with a trust loan from a reliable trust lender, for his shares in the inherited property… making the transfer of property between siblings possible. Therefore, selling to a third party buyer would not be necessary – a process otherwise known as beneficiary buyouts of sibling property shares. At the same time maintaining property tax transfer from parents or, in other words, inheriting property taxes that simply transfer parents property taxes that retain the low property tax base their parents paid… due mainly to tax benefits made possible by California Proposition 13, parent to child transfer or, as attorneys call it, parent to child exclusion
A secondary conflict revolved around the value of the house, which was in dispute. A figure was finally agreed to of $1,400,000. This end result was finally resolved by both siblings agreeing to a value based on taking the middle number of the two property value projections. The Anderson’s trust loan was $958,000; and property taxes under Commercial Loan Corp’s trust loan management were assessed at only $1,687.50 – whereas estimated property tax at Current Value (1.1%) was $15,400. Estimated Annual Tax Savings was $6,857.
Both siblings were motivated to keep the low (2% maximum) property tax base that was paid in the past by their parents, thanks to property tax relief provided by the 1978California Proposition 13 property tax measure. Both Don and Marie were receptive, however each had their own attorneys, and Don, who was looking to sell, would only talk to the trust lender through his attorney, who was quite experienced with beneficiary buyouts of sibling property shares. Both siblings fortunately agreed to the trust loan process in general, with Commercial Loan Corp., but disagreed on precisely what assessed value to apply to the property.
At one point, Don insisted he would sell to an outside buyer if his sister would not agree to the assessed value of the property that he favored. It was finally decided that a Cost Benefit Analysis was required to insure it would be worthwhile to even keep the property. Subsequently, the positive outcome of that analysis resulted in a mutual agreement that it would be worthwhile to keep the home.
Additionally, there was property tax savings of $6,857, while Marie was able to keep this wonderful family property without any issues; with all her cherished family home memories perfectly intact.
Bottom line, it would have cost $84,000 in closing fees, attorney charges, and so forth – to sell this inherited property outright. Cost to keep the property, with a trust loan covering all costs and fees, was only $23,255. Moreover, the trust received an additional $60,745 more, than if they were to sell the property to an outside buyer.
Obviously, this financial choice the Anderson’s made, with respect to choosing a trust lender and opting for a trust loan plus help from Proposition 58, turned out to be the right decision for this family.
CA Proposition 58, Loans to Trusts and Property Tax Breaks
Gifting property to adult children is a wonderful thing to do, setting aside any potential tax breaks for a moment… although property tax relief does obviously make it all the more wonderful for parents and offspring. And, thankfully, to take advantage of these benefits in all 58 California counties, you don’t always need to be wealthy, with $1,200 per hour tax attorneys standing by to manage your ability to avoid property tax reassessment, or to learn how to use a trust to save on taxes or to buy out siblings’ shares in your inherited real estate… with a trust loan.
Naturally, it doesn’t hurt to live in a state like California, where you get to save tens of thousands of dollars over the years in unique property tax breaks, tax breaks that compared to other states…. or compared to California the way it was pre-1978, before Proposition 13 came about, and later in 1986 when Proposition 58 became a reality, when Californians became able to keep parents property taxes upon inheriting property from parents, with the ability to transfer parents property taxes, inheriting property taxes that are as low as they can possibly get on a property tax transfer, with a simple parent to child transfer, or, as lawyers call it, a “parent to child exclusion”.
Another related point that seasoned California trust lenders, real estate attorneys, and realtors know quite well, is the fact that large loans to irrevocable trusts are not simply for the extremely well off. These are trust loans in California for wealthy and middle class beneficiaries alike… loans to irrevocable trusts, to buy out siblings’ share of inherited property, with sibling to sibling property transfer when selling shares of inherited property.
This provides beneficiaries who insist on selling inherited property with secure, fair transfer of property between siblings; with enough cash to equal, in fact generally to surpass, their share in that property; this process allows the beneficiary or beneficiaries who do not wish to sell out, the absolute right to retain the inherited property in question – plus receive a low yearly property tax rate at levels unimaginable to most property owners and beneficiaries in other states.
Quite simply, all business and residential property owners in America, nationwide, should pay no more than the 2% maximum property tax rate property owners pay ever year in California in property tax rates, plus low rates on property transfer, thanks to California Proposition 13 and Proposition 58, generally in concert with a trust loan that pays for expensive closing and legal costs.
Our conversation with CEO Michael Wyatt of Michael Wyatt Consulting, a Real Property & Property Tax Advisory firm based in Corona, CA – continues…
Property Tax Transfer: And what about your clients, Mr. Wyatt? Do they understand and go along freely with your plan, avoiding property tax reassessment with Proposition 13, and property tax transfer, with the right to transfer parents property taxes, and other benefits from Proposition 58… the whole nine yards?
Michael Wyatt: Most of my clients own real estate…. To inherit a house from their parents, my clients would have to pay reassessed taxes on their own home and the inherited property from their parents. Most people understand that with Proposition 13 they (A) save their inherited home, and (B) get a significant tax break on their primary residence… Without these tax breaks most middle class people, and elderly folks living on a fixed, generally modest income – would, in most cases, be forced to sell their inherited property.
Property Tax Transfer: With so many positive factors generated by Proposition 13 and Proposition 58 – why would anyone go against these tax breaks that positively impact the middle class, the upper classes, blue collar folks – you name it! Who are all those people over-using the media to endlessly whine about Prop 13 adversely affecting ownership of real estate in California; causing shrinkage of the real estate market. They appear to be endlessly pushing back against property tax breaks that are so incredibly popular, so beloved by all Californians… that even renters seem to get the fact that keeping landlords’ property taxes low also keeps their rent low…
Michael Wyatt: Politicians with special interests clearly want to destroy Proposition 13, and ultimately Proposition 58 and 193 – for their political interests, claiming under-funding and over-spending supposedly brought about by property tax breaks.
Property Tax Transfer: Sir, what in fact is actually causing all that under-funding and over-spending? Folks would like to know this!
Michael Wyatt: In fact, what is actually causing these under-funding issues is lavish over-spending on overly generous local government pension plans and salary increases; funding local and state raises and bonuses… over-spending on overly robust health coverage plans, vacation benefits, and retirement-pension plans. As well as over-spending on special interest projects and massive special interest public works, don’t forget that!
Property Tax Transfer: And killing the California real estate market… Is there any validity to this at all?
Michael Wyatt: None.
Property Tax Transfer: Any truth to all that verbiage about Prop 13, and home owners’ ability to transfer parents property taxes, adversely affecting ownership of real estate in California…?
Michael Wyatt: Zero.
Property Tax Transfer: (Laughter) Zero!
Michael Wyatt: Zero! Proposition 13 is not adversely affecting ownership of real estate… Not killing the real estate market in California. It helps the real estate market, not hurts it! Did those opponents and critics of Prop 13 ever hear about the building of new homes and condos in Los Angeles… in the Bay area… in a thousand other locations in California? There is no truth to that argument whatsoever. Zero truth to that position.
Property Tax Transfer: Zero truth… That’s incredible.
Michael Wyatt: Zero!!
Property Tax Transfer: Thank you sir, for a terrific interview. And eye opening analysis of real property inheritance, Prop 13, Prop 58 – trust lenders; and the art of trust loans throughout the state of California.
Michael Wyatt: Thank you, sir. It’s been a pleasure.
Looking at a few cases the Michael Wyatt Consulting Firm has worked recently, gives us a clear overall idea of how the Proposition 13 low property tax base and Proposition 58 property tax transfer and trust loans profoundly affect both home owners and business owners in the state of California – such as:
The Los Angeles County Power Center case, which reduced the Tax Assessor’s value by nearly $22 million, resulting in $232,000 in total refunds. The firm’s Orange County Self-Storage Facility case reduced over $18 million in Assessor’s value, resulting in $185,500 in total refunds. The firm’s work for a Los Angeles movie theater reduced the local Tax Assessor’s assessment by over $12 Million, resulting in a total refund of over $129,000.
The firm’s Orange County Retail Center case lowered the local Assessor’s valuation by $11 Million – generating over $113,000 in total refunds. Just a few examples, like these, show us the enormous potential beneficiaries inheriting California property from parents actually have, in terms of saving a great deal of money every year in property taxes, due to Prop 13 – as well as the stable Proposition 58 driven ability to equalize cash payments to co-beneficiaries during real property buyouts, with trust loans. Plus many other lesser known but meaningful benefits.
When beneficiaries have an opportunity to avoid property tax reassessment, while inheriting property taxes during property tax transfer – typically as middle class or upper middle class California based residential and commercial or industrial property owners – and one has the ability keep parents property taxes – one can transfer parents property taxes over to inherited property; which features parent to child transfer, commonly known as parent to child exclusion. Hence, one retains parents (Proposition 58) or grandparents (Proposition 193) low tax base during property tax transfer… basically forever.
The fact that our property taxes then remain at the low California Proposition 13 tax base that our parents had generally makes a significant difference to our life. Financial stress from unpredictable, and often unaffordable, tax rates are lifted off our back. Tax rates that would be in the tens of thousands of dollars every year, were it not for CA Proposition 13 tax relief, and Proposition 58 property tax transfer benefits.
For assistance with California property tax issues or to take advantage of California Proposition 58, Michael Wyatt can be contacted at (951) 264-6152. You can reach the Commercial Loan Corporation at (877) 464-1066; or simply go to https://cloanc.com with questions on a loan to a trust, irrevocable trust, or a property in probate plus numerous other related issues.
Our conversation with CEO Michael Wyatt of the Michael Wyatt Consulting firm, Real Property & Property Tax Advisory, based in Corona, CA continues…
Property Tax Transfer: Mr. Wyatt, how do you see the inner dynamics of your average real estate conflicted estate, or trust? Meaning, the conflict between those who are determined to keep their inherited property, and those who prefer to sell…
Michael Wyatt: When your parents die, and your trust agreement says “equal shares”…. That means equal shares. People basically just get the overall concept of getting money from a trust loan even if it doesn’t sell. If you’re going to hold a property for more than 7 years, it makes more sense, and it’s more money in your hand… It makes more sense all around to get a trust loan; and everyone gets more money. For short term it may not be more beneficial to not sell.
Property Tax Transfer: From your experience, do more people prefer to sell inherited property? Or do they lean towards keeping property they inherit from their parents?
Michael Wyatt: Judging from the beneficiaries that come to us, more beneficiaries end up not wanting to sell their inherited property. And if they did want to sell, a lot of people can be easily convinced, with cash from a trust loan equalizing things for them.
Michael Wyatt: You have to look at it this way: there are always one or two, minimum, who insist on selling their shares in an inherited property. And there is our initial client contact, with those who want to sell. And that is where these family estate or trust conflicts begin. When mom and dad die proceeds are in effect, since inheritance is not subject to capital gains tax. But people who do plan on selling an inherited property come to see very quickly that they are going to be hit hard by capital gains tax. If they sell their property, capital gains tax always hits them.
Property Tax Transfer: And so that, in fact, is a very strong convincing factor.
Michael Wyatt: Correct.
Property Tax Transfer: And property tax relief in general… How did this come about in California, whereas there is nothing quite like this anywhere else in the USA?
Michael Wyatt: Well, we have Oregon, and they’re close, with a maximum property tax rate of 3%… which is close to California’s Proposition 13 cap of 2%. But, right – you’re correct, that’s about it in the United States for serious, meaningful property tax relief.
Property Tax Transfer: So how did this type of property tax break actually start, and evolve into such a strongly supported property tax system, with rock solid rights to parent to child transfer, or rather parent to child exclusion… consistently avoiding property tax reassessment, and so on?
Michael Wyatt: These property tax benefits from Proposition 13 came about in California because people didn’t want property tax increases of 25% or 30%, or whatever. It really was out of control. And property tax rates were particularly high and unpredictable and unstable in California, for whatever reason, prior to 1978 when Prop 13 passed. So, as you know, property appreciates let’s say on average 20% per year. For the sake of argument, let’s say 20%. But property tax values are only going up by 3%… People know intuitively that they can’t rely on the Assessors evaluation. Property value goes up 10% or more let’s say, as opposed to assessed value going up by 2%. That’s a significant difference.
Property Tax Transfer: Was property taxation in California so bad before 1978 that something like Proposition 13 property tax relief, parent to child transfer rights, was simply inevitable?
Michael Wyatt: Was California really that bad before 1978, when Proposition 13 tax relief went into affect? Yes. California was raising taxes more than any other state, before 1978. Most seniors – before Prop 13 – were reassessed at present-day rates. And many, many were forced out of their home. They simply could not afford the property tax hikes descending on them. Period. People, especially older people, were being impacted with higher property taxes year after year. And in many cases – with catastrophic results, obviously.
>> Click Here for Part Four, to Continue Interview…
Our in-depth interview with CEO Michael Wyatt of the Michael Wyatt Consulting Firm in Corona, CA continues…
Property Tax Transfer: Are there other essential benefits to using trust loans, with special Proposition 58 benefits?
Michael Wyatt: Well… going back to Commercial Loan Corporation… Their loans to trusts give my clients several invaluable benefits. Their terms can be a lot more flexible than an institutional lender like Wells Fargo or Bank of America. Also, Commercial Loan Corp is self funded, and that’s basically why they can extend easier terms to clients.
Property Tax Transfer: And compliance issues?
Michael Wyatt: Compliance for both commercial and residential property owners is far less strict. Commercial Loan Corp doesn’t charge any fees up-front, that’s another great benefit. Plus, they don’t require paying interest on their trust loan in advance. Not only that, there is never a “due-on-sale” clause… that requires the mortgage to be repaid in full when sold; or that all or some of the interest owed must be paid up-front to secure the mortgage. No “alienation clause”… in the event of a property transfer, stating that the borrower has to pay back the mortgage in full before the borrower can transfer the property to another person. There is none of that.
Property Tax Transfer: That is impressive. We understand that using their loan-to-trust process is far less expensive – and much faster.
Michael Wyatt: No question about it. The speed of their trust loans is much faster, typically five to seven days instead of two or three weeks. And if you sold a property outright, without using a trust loan, you have closing costs, legal fees; a commission; etc. It gets very expensive. Going with a firm like Commercial Loan Corp – all costs are offset, unless you plan to keep a property for 2 or 3 years or less. Then it doesn’t make sense. But generally you’re looking at keeping that property for seven or more years, as a rule.
Property Tax Transfer: Didn’t you work for the Orange County Tax Assessor’s office for many years prior to opening up your own firm to help clients with real estate and property tax issues?
Michael Wyatt: Yes, that’s correct. I worked for the Orange County Assessors office for 25 years – working on the more complex industrial and commercial cases. I eventually became a manager reviewing ten Appraisers dealing with CA property tax law… until 2010. But it was mostly all pretty normal, average cases.
Property Tax Transfer: During all that time with the Orange County Assessor’s office, does anything stand out, looking back?
Michael Wyatt: Interestingly enough, we worked on the largest Great Park deal, which Lennar Homes purchased from the United States Navy. We actually ended up discounting the pricing on account of contamination. Coincidentally, my supervisor ended up being my partner in our current firm. By and large, most of the deals I managed were very ordinary.
Property Tax Transfer: By and large, who are your clientele?
Michael Wyatt: Most of my business, with property owners, comes from real estate attorneys… In fact, we’ve been approved by the California Bar to teach attorneys about Proposition 13 and SBE “share and share alike” – And the attorneys pre-qualify our clients. They get the value proposition right away, without much effort.
Property Tax Transfer: At the root of it, what do you think brought about California Proposition 13 – inheriting property taxes, at a low base, from parents?
Michael Wyatt: Let me tell you… During the time I worked for the Orange County Assessors office – Howard Jarvis, originator of the Proposition 13 property tax measure, was one of the largest apartment building owners in California… Many people don’t know this. And he saw first-hand that landlords don’t move. Citizens move – every 7, 8 years. So landlords benefited even more from Proposition 13 tax relief than the consumers! And it did benefit consumer of course, and still does. But this did help landlords even more so, and helped to keep rents low.
Michael Wyatt: The California Split-Roll tax on commercial real estate will not pass.
Property Tax Transfer: You truly believe that? Commercial property owners will continue inheriting property taxes at a low rate; they’ll keep paying low property taxes every year, continuing to avoid property tax reassessment…
Michael Wyatt: Absolutely. Because all the big money people and power brokers in California, in Los Angeles, in the entertainment industry, in other big time industries, don’t want it. If it passed, shopping center owners and store owners would have to increase their prices on goods and services. No one in leading positions in the business world wants that. However, John Q. Public doesn’t understand that. Big donors do understand it, and they affect the process. So the Split-Roll tax will not even get to a vote.
Property Tax Transfer: Really.
Michael Wyatt: Really. It’s not even going to get to a vote.
Property Tax Transfer: Not even get to a ballot? That’s incredible. Let me ask you something… Don’t consumers even suspect that if the Split-Roll tax passed, there is no more inheriting property taxes from parents at nice low rates… No more cheap rent… All the goods and services they’re used to would go up, as landlords (owners of business and commercial properties), will be paying much higher property taxes, and will be forced to increase their tenants’ rent?
Michael Wyatt: No. Consumers typically don’t analyze these issues far enough out to see what the fiscal affect will be on them. But, even so – the public is still 99% in favor of leaving Proposition 13 in place. Despite all the misinformation in the media.
Michael Wyatt’s very busy consulting and advisory firm in Corona, California, Michael Wyatt Consulting, works with attorneys, CPAs, financial planners, real estate brokers and their clients; who have real property and require assistance with a property tax issue. Mr. Wyatt believes that each and every client is unique, and comes to his firm with unique real property requirements. No one is a simple number on a list at Mr. Wyatt’s firm. All real estate services are designed to customize every client’s real estate needs and solutions, with decades of experience behind every analysis, insight & service.
For 25 years, Mr. Wyatt functioned successfully as a star appraiser for the Orange County Assessor’s Office – and was consistently given the most difficult commercial, retail, office, industrial, residential and apartment project appraisal assignments. As Operations Manager, Mr. Wyatt served as a senior Commercial & Residential Review Appraiser. Michael Wyatt provided valuation and legal assistance to the Assessor’s Office top management and staff on current Assessor Office guidelines and procedures, with respect to property tax laws, appraisal best practices and techniques.
Michael Wyatt Consulting annually reviews clients’ real estate values. The firm studies and forms strategy for proposed real estate transactions, along with ensuring property tax assessment avoidance. Mr. Wyatt conducts comprehensive real property research, reviews real estate deeds and other instruments for accuracy prior to recording; and serves as a liaison between clients and the Assessor’s Office – maintaining smooth, issue-free communications, coordination and cooperation with Assessors and other essential governmental agencies.
Part one of the interview with Michael Wyatt, a California Property Tax Consultant
Property Tax Transfer: Mr. Wyatt, thank you so much for speaking with us today.
Michael Wyatt: Very glad to be able to do it.
Property Tax Transfer: Can you tell us how you view Proposition 58, and how you explain this unique property transfer tax break to new clients? You must have to teach certain clients about what’s involved to keep parents property taxes, avoiding property tax reassessment and what they need to focus on in order to transfer parents property taxes to themselves when inheriting property, and what’s involved with California property tax transfer, and inheriting property taxes…
Michael Wyatt: You let them know that the Proposition 58 tax benefit entitles children of parents leaving them property to preserve the low Proposition 13 maximum 2% tax base. A California property tax transfer. However, a lot of people don’t fully understand that you have to apply for the benefit. It’s not automatic. And it doesn’t apply to the principal home.
Property Tax Transfer: What about explaining restrictions on this tax break?
Michael Wyatt: You have to explain to them that they get the assessed value tax benefit only if it’s a non principal home. You get the assessed value waved if for example it‘s a million dollar property… You get the million excluded – but the overage is reassessed… A lot of people don’t know that. The creators of the trust get this benefit.
Property Tax Transfer: Exactly how do you define “children” of the parent leaving property?
Michael Wyatt: The definition of ‘a child’ or “children” is typically the adult children of a decedent…But this also refers to step-parents. Step-parents can also transfer property to a step-child… Mom is a step parent and can still get the benefit. In laws get the benefit as well. You don’t have to be blood relatives.
Property Tax Transfer:Michael Wyatt Consulting frequently works with the popular trust lender Commercial Loan Corporation, providing clients with trust loans. Beside talking to them about the California property tax transfer, how do you describe California Proposition 58, and that whole process to prospects or clients, that are sort of inexperienced with all this?
Michael Wyatt: We basically introduce the trust lender, for example Commercial Loan Corporation, as a private money lender that loans to irrevocable trusts, that applies for and works in tandem with California Proposition 58… for beneficiaries who are looking to sell their real property shares – for the purpose of facilitating “non pro-rata distribution”… So every heir gets an equal share of the entire overall estate – however, not necessarily of every asset.
Property Tax Transfer: So what happens if beneficiaries go to a conventional lender, like Wells Fargo? Where there is no trust loan loan, no loans to to irrevocable trusts; no tax benefits associated with property tax transfer or parent to child transfer (commonly known as parent to child exclusion), so on and so forth.
Michael Wyatt: If there is a family that goes to a conventional, pricey lender like Wells Fargo for instance – they will always require adult children, beneficiaries that want to sell an inherited property, to ‘go off-title’, and that always triggers present-day tax reassessment. And that spells an expensive 66.66% tax hike!
Property Tax Transfer: Yes. Going “off-title”, taking your name off the title, always shifts you into a very expensive scenario. And if you use the Commercial Loan Corp. trust loan?
Michael Wyatt: Well, if the family in question uses the Commercial Loan Corp, cLoanC.com, a company we have been using for years… the loan they provide is to a trust, and not to beneficiaries; so there is no title, and no crippling 66.66% property tax reassessment.
Property Tax Transfer: Got it. Can you give us an example, sir?
Michael Wyatt: Well, for example, there might be three siblings… beneficiaries – and a house to inherit. And this is always important to remember. If you’re one out of the three siblings that wants to keep the inherited house, you are definitely looking at a 66.66% property value tax reassessment – if you’re operating without a loan to a trust, or you’re using your own cash; or getting money from a very pricey institutional lender – typically with multiple restrictions and extremely strict terms.
Michael Wyatt can be contacted at (951) 264-6152 for question on retaining a parents low property tax base. You can reach the Commercial Loan Corporation at (877) 464-1066; or simply go to https://cloanc.com with questions on a loan to a trust, irrevocable trust, or a property in probate plus numerous other related issues.
Let’s take a quick look at the actual state tax data in the great state of California… Overall revenue going to local government entities from property taxes throughout California was nearly $5.0 billion in 1978 to 1979… and by 2010 to 2011 real estate tax revenue was at $49 billion per year! An increase that is two and a half times the rate of inflation over the same period, furnishing California local government entities with a very robust stream of real property tax revenue.
On the human side, away from the economics of the issue, folks in California, prior to Proposition 13, before 1978, were seeing elderly neighbors, friends and senior relatives, inheriting property taxes in CA… being forced from their homes as egregious real property tax increases spiraled out of control — and in some areas literally doubled from one year to the next — as older friends and beloved elderly relatives living right next door on fixed incomes, could not meet these unfair tax increases and were cruelly pushed out of homes they had been living in, and raised families in, for over 40 years. neighbors were being forced from their homes.
After Proposition 13 was voted into law, Californians saw right away the benefits of a tax system that would limit annual tax increases to 1% to 2% max, and began to provided a stable system for everyone in California – from government agencies that depend on property taxes, to people like seniors and other various middle class home owners… turning what had become a dreaded system of out of control real property taxes – into a fair, predictable tax system year to year – no longer a financial nightmare for those who happened not to be wealthy, living on modest or fixed incomes.
And of course in 1986 Proposition 58 was passed in California, making Proposition 13 all the more critical and invaluable… smoothing out property transfer from parent to child into a formal transaction; middle class people inheriting property taxes in CA now had the ability to avoid property tax reassessment at present-day rates, with the right to keep parents property taxes intact. Naturally, this was a major advancement for Californians, in terms of tax relief. Not only for residential and commercial property owners – but for renters all across the state as well, since rents remained reasonable as long as landlords were not besieged by increased property taxes.
Nonetheless, those opposing this most popular tax solution called Prop 13 by Californians, still continue dragging the same old tired arguments through the gutters and broken down political avenues used by real estate executives, politicians and newspaper editors to put forth their old, discredited arguments in Op-Eds and widely debunked opinions in Editorials, in the few newspapers that will allow them the space to air out their opinions — despite the fact that everyone knows most Californians favor Proposition 13 & 58. The critics are tone deaf.
For those of us who want to know more about parent to child transfer and parent to child exclusion; about trust distribution loans, avoiding property tax reassessment, proposition 13 transfer, how to keep parents property taxes… and how to effectively transfer parents property taxes. And for property owners who wish to educate themselves further on the subject of inheriting property taxes, property tax transfer, real property tax transfer or real estate tax transfer.
If these interests, and additionally related topics, describe you – then you’re in the right place. We welcome your opinions and comments, and we’ll add your text comments or audio/video commentary, if you have something new, valuable, or unique to add to the discourse here.
California Loans to Irrevocable Trusts for Proposition 58 Property Tax Transfers
Our Interview with noted Commercial Loan Corp. Trust Loan and Proposition 58 specialist Tanis Alonso continues…
Property Tax Transfer: Tanis, let me ask you… Beneficiaries that call your company, desperate to keep parents property taxes; for any solution to their property transfer / Proposition 58 issue – is it a safe bet to assume that 99% of the time there are elements that come up again and again?
Tanis Alonso (Commercial Loan Corporation): Well, that’s true, to a point. With beneficiaries that call us, with a trust or estate situation, there is always real property being inherited, going to one or several beneficiaries… and little, if any, cash – and each family always has different dynamics. There are always differences, as regards the people and details involved. But, the one constant you can be sure of is that there is always someone who wants to sell… and always someone who wants to keep the property they are inheriting… dead set against selling.
Property Tax Transfer: And at the end of the tunnel, is it safe to assume that with your company it’s generally a win-win equation, for everyone involved. Everyone involved, more or less, get what they want, right?
Tanis Alonso (Commercial Loan Corporation): That’s right. 99% of the time. The beneficiary, or beneficiaries, that want cash from the sale of the property that they’re inheriting, get the cash they were looking for, from the trust loan…
Property Tax Transfer: And the beneficiary or beneficiaries that want to keep the house, get to keep that house, and keep parents property taxes…
Tanis Alonso (Commercial Loan Corporation): Yes! And let me say that, typically, this is a really, really big win for them – as the siblings that wanted to sell are usually very vocal, and very aggressive about their desire to do so! That beneficiary that wants to keep that property, that is also able to get the other siblings a large amount of cash for their shares in the inherited real estate – while still being able to keep the home they’re so attached to, and keep parents property taxes; keeping parents property tax rate. This would be practically impossible, were it not for our trust loan. And there’s your win-win equation!
Property Tax Transfer: And what about the cost factor? Costs involved in the equation… How does everyone benefit on that level, getting cash to the beneficiaries that wanted cash from a house sale? Versus coming up with property buyout cash themselves…
Tanis Alonso (Commercial Loan Corporation): OK, so cost involved, selling versus keeping inherited property. I’ll try to keep the equation simple. Costs associated with this property funding process through a trust loan, paying for everything, including beneficiary property shares buyout, taxes, etc. is, on average, 3.5% – So by someone keeping the family property everyone will receive more money than if they were to sell the property at approximately 6.5% in costs. The average trust receives $45,716 more to distribute than if they were to sell the property to some random buyer. Each beneficiary on average is receiving $16,652 more by someone keeping the property, instead of selling it. And our average annual tax savings is $6,043. We have already saved a combined amount just shy of 1 million dollars for our clients on property taxes. That is a significant benefit for all beneficiaries when someone keeps the property instead of selling it!
PropertyTax Transfer: So you’re saying those savings would have been completely lost, per beneficiary, if they had sold out to a regular buyer…
Tanis Alonso (Commercial Loan Corporation): That’s right. For example, say it’s you and your sister. A major conflict. You want to keep the house you’re all inheriting from your parents, plus keep parents property taxes. Why should I let my sister sell? The solution there is because you are going to get more cash in your hands than if you were to sell the property! That’s the bottom line. A trust loan transaction takes 7-10 business days whereas selling will take a few months. Everyone receives more money, more rapidly, then if they were to sell the property on the open market. Everyone benefits from this… it’s win-win all the way around.
PropertyTaxTransfer: So you let your sister sell, so everyone wins – is what you’re saying.
Tanis Alonso: Of course! Let her sell, let her get her way – and you end up getting your way… you get what you wanted, to keep your house with everyone paid off and happy. No more conflict. On a $500,000 property – do you want to spend 6.5% to sell that property, with a realtor, or 3.5% through our trust loan, in keeping with the Proposition 58 tax system? Which number would you want to give away, 6.5% or 3.5%?
PropertyTax Transfer: Naturally. So the long range picture looks like increases in taxes as well, so that’s not as affordable either.
Tanis Alonso (Commercial Loan Corporation): Absolutely right. In certain cases a property tax reassessment can add an extra $700 to $1000 per month to your property taxes. That’s an extra $1,000 per month – not per year! Month after month. That is affordability vs not affordability to many.
Property Tax Transfer: Going through the Proposition 58 tax system, with the trust loan paying everyone off… What would property taxes look like going down that road?
Tanis Alonso (Commercial Loan Corporation): OK so the question is, “why do I need a trust loan to buy out beneficiaries who want to sell our inherited house?” The answer is you can still keep the house you’re inheriting, and not spend any of your own money in the process. The importance of the trust loan is that you can buy out your siblings and still keep parents property taxes. You keep 100% of the low Proposition 13 property tax base that was originally paid by your parents. If you were to use your own money to buy out your siblings, the State Board of Equalization would see that as a sibling buying out a sibling – and that would definitely trigger a property tax reassessment. Naturally, the result of that would be higher taxes. So you need the trust loan to buy out your siblings in order to take advantage of Proposition 58, and keep the low property tax base.
Property Tax Transfer: Most people don’t have that kind of cash on hand nor do they want to use all of their cash for this just to buy out beneficiaries in an estate setting. Especially if the numbers go higher…
Tanis Alonso (Commercial Loan Corporation): Beneficiaries who want to keep their inherited property still put a lot more money in their pocket, still save a lot more, by not using their own funds… by buying out beneficiaries that want to sell by going the trust loan route. Staying within the discounted Proposition 13 tax base, being able to keep parents property taxes … taking advantage of the Proposition 58 property tax system, or tax shelter. Using this tax shelter that we looked at before, if you recall – would be around $1,200 per year on a million dollar property. Saving thousands of dollars annually on property taxes by taking advantage of Proposition 58; keeping their parents low property tax base.
Property Tax Transfer: Yes, the difference in the numbers are stunning.
Tanis Alonso (Commercial Loan Corporation): Yes it is. So if you use your own money to buy out your siblings you will trigger a reassessment… if that was reassessed normally, without doing the property transfer and beneficiary payoff with our trust loan – you’d be looking at an $11,000 tax hit per year on the same million dollar property! If reassessed at the current, present day, base rate – that tax hit goes up 10 times. A significant difference in cash back in your pocket after it’s all done and said. Trust loans are a huge benefit for all of these families and that’s how we’re able to really help people in a significant way.
Tanis Alonso: Absolutely. And helping people in this way is what it’s all about! That entire viewpoint is the basis for this whole company, from the top down – starting with the CEO, who is a truly terrific guy, who genuinely loves helping people, with money, memories, and time. And you can’t replace memories and time!
Property Tax Transfer: You can’t replace memories and time… Very well put! That is a concept to remember.
Tanis Alonso: It is so important to remember, when you truly care about what happens to the people you’re helping.
Property Tax Transfer: Very true. Your clients are lucky to have you folks working for them. Thanks so much for speaking with us today.
Tanis Alonso: Thank you. It was a great pleasure chatting with you.
We sat in with noted Proposition 58, trust loan expert – Tanis Alonso, at Commercial Loan Corporation in Southern California. Tanis has a uniquely profound, global understanding of the entire trust loan process; and applies a very human, not simply financial, viewpoint to the process ~ as does the entire team at the cloanc.com organization; with a strong, genuine focus on “helping people” not simply implementing financial transactions…
Property Tax Transfer: Thank you so much for agreeing to chat with us about Proposition 58 and trust loans today…
Tanis Alonso: Of course. It’s my pleasure.
Property Tax Transfer: Great. Tanis, can we take a close look at how the basic trust loan process works in California, from your perspective, as a lender – and from the point of view of your average everyday beneficiary, many who need to keep parents property taxes… Some who want to sell a property they are inheriting from their parents – and of course the other beneficiaries to a trust or estate that are determined to keep that home, and fight that sale. But first, who is your typical caller? Who in the estate or trust scenario tends to reach out to you first?
Tanis Alonso: Basically, whomever is trying to not sell the inherited property – is generally the initial caller to my office. It might be the trustee, frequently at odds with certain beneficiaries… Or very often it’s a family member, one of the beneficiary’s to the trust that doesn’t want to sell that home.
Property Tax Transfer: Got it. So, what does an average Proposition 58 property transfer and trust loan scenario in California look like, contributing to peace of mind for property owners? There must be similar scenarios, that reflect average trust or estate outcomes all across the state.
Tanis Alonso: Absolutely. One of the most common scenarios we see, here at Commercial Loan Corp., are elderly parents, for example… who, sadly, pass away, leaving loved ones behind. So, let’s say there is an estate, or perhaps a trust, and there are three beneficiaries involved… And property is the only asset… Let’s say there are no cash accounts. And this is not uncommon these days.
Property Tax Transfer: Yes, we hear that it’s quite common to see a trust inheritance, or probate estate, where there is very little cash left at the end of the road…
Tanis Alonso: Exactly. Parents who pass away in their nineties let’s say, who basically have spent most of their cash assets that were in savings, or in stocks and bonds, and by the time they get into their mid or late nineties, those assets are mostly gone, cashed out or spent –
Property Tax Transfer: You mean, simply spent on living… no frills, no traveling around the world, staying in fancy hotels, eating out in 5-star restaurants…
Tanis Alonso: Oh no, nothing fancy… just simple day to day living. Food, rent, medical expenses – normal expenses that eat up plenty of cash.
Property Tax Transfer: Certainly. Medical expenses can eat up an entire estate… and leave a house, and that’s all that is left in so many trusts, in so many estates, left by decedents. At least it’s usually paid for.
Tanis Alonso: Yes, many older homes being inherited by beneficiaries in these scenarios are not carrying any debt. Which is fortunate. So let’s say in many of these middle class or even upper middle class families there is a house, maybe some land, and possibly a few valuables…
Property Tax Transfer: OK. So there isn’t much money left in many inheritances… So what do beneficiaries do? When do these conflicts we hear so much about begin, when a house is being inherited by several beneficiaries… some who wish to sell, and some who prefer to keep the property, and to keep parents property taxes?
Tanis Alonso: Well, here is a typical middle class inherited real estate scenario – let’s say, for example, there are three beneficiaries and no other assets being inherited except an older home. One beneficiary wants to keep the house, to keep parents property taxes; while the other two siblings prefer to get cash from an immediate house sale, probably through a nearby realtor. But – instead of selling to a buyer, here is where Proposition 58 and a trust loan comes into play, providing liquidity and compliance with the Proposition 58 tax system – furnishing the two siblings who prefer to sell, with enough cash liquidity as if they had sold their shares in the inherited property to a buyer…
Property Tax Transfer: So why not sell? Why the trust loan?
Tanis Alonso: Because with a loan to a trust there is the upside of less expense. Frequently, we’re talking about ten times less of an expense than would normally be involved in a house sale. Again, a process compensating beneficiaries through a trust loan, instead of a house sale or coming up with the cash yourself… versus a formal house sale through a realtor that would cost approximately ten times the amount to process the entire scenario, a house sale, with realtor commission and fees, taxes, ancillary costs, etc…
Property Tax Transfer: Paying off the beneficiaries who wanted the cash from a house sale in the first place, right?
Tanis Alonso: Exactly. And so the rest of the trust loan goes to pay for 100% of parents Proposition 13 tax base – and the Proposition 58 tax system makes it possible to transfer the property to the beneficiary or beneficiaries that did not want to sell – to keep parents property taxes at the low Proposition 13 tax rate – or involving Proposition 193 if it is real property, not left by the parents, but by grandparents.
Property Tax Transfer: You say ten times less on expenses versus paying for it yourself?
Tanis Alonso: Absolutely. It costs the families we help far less to get a trust loan from us, believe it or not, then it does if they were to dig into their own savings to complete the Proposition 58 property transfer process.
Property Tax Transfer: How does that translate in terms of real numbers?
Tanis Alonso: Let’s say a property value is currently one million dollars and the current tax base is $1,200. If they were to get reassessed at current value that would be around $11,000 annually. By someone keeping the property and obtaining a trust loan to properly buy out their siblings that allows the beneficiary that is keeping the property to keep parents property taxes, to retain 100% of the Proposition 13 tax base that was paid by their parents and keep that low property tax base of $1,200. This of course creates much greater affordability than if they were to improperly buy out their siblings and have that property reassessed. The loan to trust goes hand in hand with the Proposition 58 property tax transfer system, creating enough liquidity to equalize distributions, not sell, and allow a beneficiary to keep their parents property with their low property tax base.
Property Tax Transfer: It sounds counter intuitive, doesn’t it. Tanis Alonso: I know, it does sound counter intuitive – yet it’s true. All you have to do is run the numbers yourself, and you’ll see what I’m talking about. It’s a better way to be able to keep an inherited house in the family, and to keep parents property taxes, when there is a dispute going on that pits the beneficiary who wants to keep a house against the beneficiaries that want to sell that home. A home that a family has so many memories associated with; with such strong emotional attachments to. There are so many wonderful family memories that are attached to each home. And every home is unique and different in that sense, just as every family member is different and unique.
Property Tax Transfer: You mean emotional memories you can’t replace with cash, in fact you can’t buy for any amount of money.
Tanis Alonso: That’s right. Anyway, this process allows families to keep that home in the family. And that’s the most important point!
Property Tax Transfer: It is the crucial point.
Tanis Alonso: Absolutely. And as a person on the front lines for this firm, neither I or Commercial Loan Corp. view each trust loan scenario as simply a “financial transaction”. Nor do we see the home they’ve lived in for decades as just a “piece of real property”. To us, this a “piece of family history” in the making. And the process a family decision, not a “transaction”. We see our clients as real families that we’re helping, financially and emotionally, not just as clients signing a contract for a trust loan. For us it’s much more than that.
Property Tax Transfer: It’s very obvious that you really enjoy helping people… getting them money when they really need it – and saving them on the cost side in the bargain, with trust loans.
Tanis Alonso: Correct. We see them as real people that we’re able to help in a time of need. For us it’s so much more than cash and property – we don’t view it that way. We’re talking about family history here. Not just “another deal”.