Inherit A Home And Keep The Property Tax Base

Inherit Property and The Property Tax base

Inherit Property and The Property Tax base

The Los Angeles Times, in their inimitable fashion, put it like this on Oct. 19, 2020:   

About 650,000 California homeowners over the last decade received a tax break that allows them to maintain their parents’ low property tax payments when they inherit their homes…

The provision has since been dubbed “the Lebowski loophole” after The Times found that “The Big Lebowski” actor Jeff Bridges and his siblings had advertised a beachfront home in Malibu inherited from their parents for nearly $16,000 a month in rent despite an annual property tax bill that’s a fraction of that amount.

Proposition 19 would eliminate this property tax break for investment homes and commercial properties, meaning that heirs who inherit their parents’ properties would pay taxes based on market value. With some limitations, children who move into homes inherited from their parents would be able to retain the tax break.

Interesting how the Times gives credence to deceptive wording, while confusing the so-called benefits of Proposition 19.  They parse the actual Prop 19 rules and regs, and purpose in fact…twisting the facts to read, “Proposition 19 would eliminate this property tax break for investment homes and commercial properties…”  Prop 19 does not now exist to eliminate investment homes and commercial properties.  It exists to eliminate the parent to child exclusion, or parent to child exemption… unless you change your life  and move into a new inherited home within a year. 

Interesting that The Times chooses to leave out the fact that inherited property  will be sold off at a loss by inheritors who may not be able to move into inherited property within a year… because middle class homeowners, 95% of the folks affected by this new tax law, won’t be able to afford the new property taxes without the parent to child exemption being utilized within that year one after mom or dad dies.

Instead of telling it like it is The Times tells us, “With some limitations, children who move into homes inherited from their parents would be able to retain the tax break.”  Sure, “some limitations” meaning those folks inheriting property must uproot themselves and set up a  new life within 12 months, plus sell the home they are living in, or give up their inherited home at a financial loss. And maybe they can’t just up and leave their current residence, sell it, and move to a new home that was owned by their parents, that perhaps does not suit them and their family. For a number of reasons. 

Proposition 19 doesn’t exist to eliminate greedy real estate investors… It exists to push middle class home owners out of the way, to force them to sell inherited property if they can’t uproot themselves and move into their inherited home within a year while figuring out a way to sell their own home. In a market hampered by Covid, where maybe it’s not so easy to sell that home they’ve been living in.  These are not investment sharks and real estate hustlers, as the Los Angeles Times is falsely hinting at.  These are regular middle class home owners.

This new tax law affecting property tax relief in California was put in place to generate more money for realtors and the CA Legislature.  Directly impacting consumers.  Regular folks, like you and I.  Not to eliminate “property tax breaks for investment homes and commercial properties”.   That is, we’re sorry to say,  a false characterization.

Abruptly, the entire state found out at the last moment, prior to the November vote, that C.A.R. had launched Proposition 19, along with the California Legislature, which passed by a few votes; due mainly to an extremely clever, albeit a bit deceptive, marketing campaign – confusing voters while hiding the fact that Prop 19 exists to kill parent to child exclusion benefits, bit by deceptive bit.  Don’t be fooled, completely unraveling the parent-to-child exemption is their eventual goal.  Not giving residential and commercial property owners the ability to avoid property tax reassessment every year.

This type of tax break frees property owners from chronic stress based on unpredictable property taxation that is typically high for middle class incomes. This form of property tax relief makes life in general more secure and more affordable for middle class and even upper middle class residents. Rich folks we don’t really need to worry about. They’ll be fine either way. This type of tax relief allows beneficiaries to keep parents property taxes, and of course gives them the ability to transfer parents property taxes when inheriting property; avoiding property tax reassessment, keeping their tax base low through CA Proposition 13.

What is truly incredible to many of us is the ability for a beneficiary in California to use Proposition 58 to get a special loan providing cash to co-beneficiaries through an irrevocable trust, for middle class beneficiaries who want to smooth out cash obstacles (often referred to as “equalizing liquidation”) when it comes to conflicts between siblings who want to sell property versus family members who prefer to keep inherited real property… an invaluable property tax benefit.  Which is exactly why it’s so important to understand how and why Prop 19 exists to kill parent to child exclusion benefits at some point in the future… This is the C.A.R. and CA Legislature’s first baby step in that direction.

All states, forever grappling with this Covid crisis, should be heading towards tax breaks for regular middle class people, and not wasting the country’s time with absurd tax law benefiting a few wealthy corporations, a couple of hundred billionaires and multi-millionaires, with huge tax cuts they do not really need; and corporate welfare for immense companies that would be just fine without it. While a couple of hundred million Americans struggle by generally without tax breaks or tax loopholes of any kind to help them put away some extra cash in the bank every year.

In fact, all states need a Proposition 13 and Proposition 58, to help middle class families get by every year. That’s why beneficiaries or heirs in every state who are expecting real property, or are leaving real property to their own heirs, should conduct some careful research on blogs and Websites that focus on inheritance matters, to get more familiar with Proposition 58 and trust loans, on beneficiary issues and CA Proposition 13.  They should study informative niche blogs like this one…  as well as other niche  Websites that cover property taxes in depth… that delve into California Proposition 13, 58 and 193, as well as how trust loans can help beneficiaries.

All resident should learn more about why Prop 19 exists to kill parent to child exclusion benefits, bit by bit; how to keep parents property taxes and how to transfer parents property taxes, inheriting property taxes, or property tax transfer, parent to child transfer and parent to child exclusion – for residential properties of course; however, also for business oriented sites and commercial properties… that take full advantage of Proposition 58 — making use of trust loans to buyout inherited property from siblings, such as simply to get the facts straight on the transfer of property between siblings, how to buy out siblings share of a house; what makes sibling to sibling property transfer work; and how loans to irrevocable trusts help co-beneficiaries get cash while avoiding the necessity to sell their share of the inherited property.

Then, once they get your pitch together, folks in all states can tell their congressional representatives to get moving on passing property tax law for middle class home owners, not just rich folks that live in lovely upscale neighborhoods!

Many of us wonder when it got to this point in this country, when virtually the only way you can have a genuinely comfortable, safe, secure life is if you are fabulously wealthy – and nothing below that or in between.

PART THREE: Property Tax Relief Fights for Its’ Life in California…

As we all know, the Coronavirus crisis is not abating in many states – causing severe and consistent unemployment, and overall economic uncertainly.   Certain states are floundering more than others, without any federal support of any kind, even PPE – thereby costing tens of thousands of families the lives of loved ones. 

With millions of jobs initially put on hold – jobs that were placed on  “furloughed”  status or were standard “lay-offs”… are still in question, as far as resurgence is concerned.  Regrettably, it’s impossible to determine the exact number of jobs lost, as some return: whereas others do not.  Therefore, constant fluctuations make permanent calculations difficult to nail down. 

Making matters even more challenging, the federal government historically calculates “unemployment rates” by adding up the number of workers signing up for unemployment checks;  and deduce an unemployment rate in this fashion. However, once workers stop getting  unemployment checks they somehow magically disappear off the grid.  As if they somehow were never in the system.

It would be safe to say that unemployment, nationally and statewide, remains at critical levels.   And yet California is still the only state in the union that provides middle class residential and commercial property owners with genuine property tax breaks.  

And this is exactly what every state in America needs right now, with unemployment and Covid still spiraling out of control.  Lowering property taxes would surely loosen up some cash to help working families buy food and maintain some decent health coverage, plus put some money away for emergencies. 

If we were able to get property tax measures passed in most states, similar to the mega-popular tax breaks California home owners and commercial property owners enjoy, the overall positive cumulative affect on American tax payers would be significant. Folks would be able to easily transfer parents property taxes, and keep transfer parents property taxes, or buyout while inheriting property taxes at a low base rate. 

Especially in times like this – shouldn’t we all have access to property tax relief like this?  An intra-family loan to a trust, using Proposition 13 and Proposition 58 type of property tax transfer benefits and tax breaks, with parent to child transfer or as law firms refer to it – parent to child exclusion, or exemptions.

Do some research and push your Beltway representatives in Congress to put together some bills like California has passed to help home owners and commercial property owners.  And you can use the Covid crisis for added motivation.  This is covered on  informative, accurate niche Websites such as Commercial Loan Corp.  

An intra-family loan to a trust in conjunction with Proposition 58, or Prop 193, makes it possible to maintain a low property tax base basically forever upon a beneficiary buyout of sibling property shares, or as realtors call it, “the transfer of property between siblings”, and “lending money to an irrevocable trust“ – typically from an irrevocable trust loan lender.

While you’re at it, take a look at the CA State Board of Equalization to find out how all this works, or research niche info blogs such as  this one, Property Tax Transfer…  Plus other sites focused on property tax breaks for Californians. And let’s be frank… Living in that state, although there are great benefits, is admittedly expensive – in relation to many other states. 

States like New York, Texas, New Jersey, Connecticut, Massachusetts… are all expensive states to reside in.  With zero property tax relief or significant tax breaks of any kind – unless you’re a multi-millionaire or billionaire.  Then you get nothing but legislated V.I.P. tax cuts. However,  firms like Commercial Loan Corp, or Paramount Property Tax Appeal,  provide V.I.P. property tax breaks or V.I.P. personal business and  property tax reduction to everyone…. regardless or income or overall net worth. 



PART TWO: Surviving CA Proposition 19 – Losing The Parent to Child Exemption

Surviving California Prop 19

California Prop 19


Let’s be clear.  Critics of property tax relief in California are typically well educated, bright, and articulate… and write awfully convincing Op-Ed’s in the San Francisco Chronicle and the Los Angeles Times. 

Yet, for whatever reason, these critics of property tax relief never produce  examples of how or why Proposition 13 is “so unfair” – with the exception of shifting sand anecdotal evidence, without genuine case study data or specific historical events to point to.  Other than the rather deceptive Lloyd and Jeff Bridges family tale of their one beach- front property used as a secondary property to rent out to wealthy tenants.

In fact it’s almost laughable that the Bridges family story is approved by supposedly responsible editors repeatedly, in numerous high-profile California newspapers. Always without backup evidence or case study data pointing to other examples of this type of usage of Proposition 13 and Proposition 58, by other wealthy or middle class Californians.  They can’t seem to come up with a credible follow up example, or any example, of this  sort of rental activity. 

Yet critics of property tax relief did manage to come up with Proposition 19, to take down the parent to child exclusion, associated with the parent to child transfer, that is the foundation of property tax relief for home owners in this state.  Those same home owners, and  beneficiaries inheriting property from parents are wondering how this Proposition 19 measure will affect Proposition 58, in terms of establishing a low property tax base, as well as getting a trust loan to buyout siblings inheriting the same property. 

There is a great deal of anxiety in California in terms of how Proposition 58 will stand if Proposition 19  is voted into law, with respect to locking down a long-term, even lifetime, low property tax base when receiving an intra-family trust loan associated with the transfer of property between siblings or  sibling to sibling property transfer.  If Proposition 19 does pass, most current beneficiaries want to know if getting a trust loan to buyout siblings will be the same, in terms of process; or will the process be different, more difficult, or perhaps even easier.  Buying out a siblings’ share of a house, getting a trust loan to buyout siblings post Proposition 19, is an important issue for most residents of  California.

Meanwhile, despite these nuts and bolts details, we’re still forced to listen to these relentless critics of Proposition 13 and Proposition 58, dispensing non fact-based anecdotal narratives to convince the public how “one-sided” and “massively abused” property tax relief is in California. How it’s only for rich, mainly elderly, home owners.  Or for the rich and famous… like the Bridges. 

Yet we still don’t hear any actual names attached to this supposed “long list of abusers of Proposition 13” to back up these claims behind the push to pass Proposition 19.     Obviously, this is a false representation of a proven property tax relief system that benefits more middle class home owners than anyone else in California.  Which makes perfect sense, if you think about it, as there are so many more middle class people in California, and elsewhere, than rich people! 

Although lately, to backup Proposition 15, to take away property tax breaks from business and commercial property owners, we are occasionally hearing about corporations, not people, always trotted out as, “…companies like Chevron and Disneyland…” (never mentioning any other company) “…that sit on valuable property, generating a huge profit every year – yet never paying taxes on their land in terms of present day reassessment”.  OK, we’re willing to listen.  But never with any actual figures or data to backup the claims. 

So even if a few corporations take advantage of Prop 13 tax relief measures that have  been in place in all 58 counties in  California since 1978, millions of middle class home owners will see their rents sky-rocket if Prop 15 passes… and commercial property owners, and apt. landlords just getting by, as well as family-run industrial businesses that own modest income bearing facilities – all use Proposition 13 fairly and properly, and benefit greatly from it.  Just as it should be.  So we’re going to punish these few perhaps greedy companies by crippling all business property owners in California? 

Without these tax breaks from Proposition 13 and Prop 58, without people like Howard Jarvis and Jon Coupal; Kerry Smith and Michael Wyatt who have fought for these tax breaks for California residential and business property owners…  very few middle class Californians, which is most of the state, would have been able to keep inherited property.  Landlords have been able to keep rents at moderately reasonable rates due to low commercial property taxes. So on and so forth. And this business about schools desperately needing funding – is yet again another half-truth.

Sure, some of the revenue from new, accelerated property taxes will go to schools… but nowhere near what is being promised, or rather vaguely indicated. The lion’s share we are told would go to pay for unfunded state-govt. pensions. And probably other state government purposes such as pay raises, generous benefits and vacations, and so on… plus special interest public works and building projects, no doubt.  And schools will pick up what’s left on the table after all that. 

Intended… and unintended… consequences.

>> Click Here to go to Part Three…

PART ONE: Surviving CA Proposition 19

California Proposition 19 2020 Election

California Proposition 19 2020 Election


Californians are anxiously waiting to see if voters pass or sink CA Proposition 15, affecting business and commercial property owners by specifically removing their ability to legally avoid property tax reassessment; as well as  Proposition 19, which is designed to unravel the “parent to child exemption” or “parent to child exclusion” (from current, reassessed property tax rates).

In fact Californians are wondering right now, if Proposition 19 passes, how much Proposition 58 will be affected; and how they will be able to get a trust loan to buyout siblings who wish to sell mutually inherited property.  Or exactly how they will be able to work with Proposition 58 to lock in a low property tax base rate, if Prop 19 passes. Companies like Michael Wyatt Consulting or Lucas Real Estate, or Commercial Loan Corp, are fielding questions like this as we speak. 

If Prop 19 passes, California can say goodby to any property tax transfer activity from one family member to another… there will be no way to transfer parents property taxes at a nice low base rate, in fact inheriting property taxes from parents to avoid property tax reassessment or the right to keep parents property taxes with a parent to child exemption will, sadly, be a thing of the past. 

If voted into law, as the LAO (Legislative Analyst’s Office) tells us, these  property tax measures will, in effect, repeal popular inter-generational transfer protections guaranteed by Proposition 58’s parent-to-child exclusion and Proposition 193 (grandparent to grandchild exemption) property transfer tax breaks – upending tax relief protections that Californians have depended on for decades.

Proposition 15 removes property tax breaks for landlords and other business  property owners – which, if voted into law, would not only directly affect business and commercial property owners, impacting stores, gas stations, supermarkets, etc., frequented every day by consumers – but will impact everyone in California.  Not only for countless people renting units in apartment buildings all across the state, but also for tenants renting commercial properties and offices in commercial buildings will be paying much higher property tax, and therefore will be forced to raise their prices.  Hence,  the cost of goods and services will go up in all 58 counties in the state. If Prop 15 passes, prepare to pay significantly higher prices, basically for everything – for rent, gas, food, air & ground travel, clothes, electronics, movies and computer entertainment, cel. phones…  you name it!

This leaves us at roughly 50,000 to 60,000 families in California that will be victimized economically by unreasonably high property taxes… in the midst of a Covid-19 pandemic no less.  Obviously, many middle class families will  be unable to keep inherited property due to property tax hikes… and, among other difficulties, will be generally unable to afford decent health coverage that includes preexisting conditions… unless they’re over 65 and have access to Medicare – unless the ACA (“Obamacare”) has been watered down, as Republicans have repeatedly promised to do… and this is on the record.  So people in California are nervous; as are folks nation-wide.   

On top of this crisis for California home owners – if Proposition 15 passes, tenants that don’t  own but pay rent will suffer from increased rents – as Prop 15 will unravel commercial and business property owners’ ability to avoid property tax reassessment at current rates. Business property owners and landlords will no longer be able to retain a low property tax base-rate, such as  home owners supposedly will continue to do – although most of us are not entirely convinced about that. Once the door has been opened, so to speak, do we really believe that the powers that be in California, the Legislature, and their realtor colleagues, are simply going to stop there? 

As far as Proposition 19 is concerned, most middle class beneficiaries and  families inheriting real property from their parents would be forced to sell that  property within the first year, as Prop 19 dictates, plus most beneficiaries or heirs will be unable to cover increased transfer costs and, in particular, yearly hiked up property taxes.  Hence, they are doubly motivated to sell inherited property many would much prefer to keep. 

Opponents of CA Proposition 13 repeatedly offer up the tired tale about the Bridges family using Prop 13 to transfer a pricey luxury beachfront property, paying little tax, and renting out for big bucks.  It’s interesting that this story  is literally the only narrative we hear about that condemns Proposition 13 and Proposition 58 by real-life example. So they raised $58 Million, in part, on this much repeated tale, and other anecdotal non fact-based evidence, to destroy property tax relief in California.

>> Click Here for Part Two…

PART SEVEN: Coronavirus Crisis in California Motivating Certain Politicians to Push Harder for New Proposition 15 “Split-Roll” Property Tax

Property Taxes During the Pandemic

Property Taxes During the Pandemic

So let’s wrap this discussion up with a brief recap… and summary.  It  is completely obvious to any reasonable person that even though the new, proposed Proposition 15 commercial & industrial property tax on landlords and business property owners is not aimed at consumers per se – at the end of the day, it is consumers who will pay for this new property tax; paying significantly higher prices for normal everyday goods and services. 

Consumers that have for some time already been struggling with the high cost of living in the state of California… as have residents in, for example, other states at the top of the list of “most expensive states” list…  most expensive American states – such as Hawaii, New York, Washington DC, and Oregon.  States that are this costly to live in do not, and we should repeat do not, need property tax hikes, especially at a time like this when state economies are literally crumbling under the weight of a Coronavirus Pandemic, a tsunami of unemployment, now surpassing 51 million jobless claims nationwide and over 13 million looming evictions; plus a host of other related problematic issues. 

These costs, in California, encompass some of the steepest taxes in the country, including some of the highest gas, income, and sales taxes. In fact, the California Legislature just passed policies that have resulted in residents paying 48% more for electricity than the rest of the nation.  Fact, not opinion.

Adding a new property tax on top of these existing costs will only exacerbate the affordability issue for many Californians. The downside (ironically, there is no upside) of the Proposition 15 business property & industrial facility property tax that Secretary of State Padilla and other powerful political critics of property tax relief in California are not looking at.

We suggest they had better remember we are in the throes of a national Pandemic, with California running particularly high infection rates, and they would do well to start looking at a potentially massive downswing of middle class and working class personal income descent if landlords, business and commercial property owners   abruptly lose their ability to use Proposition 13 to avoid property tax reassessment. At the same time, if business properties have been passed down through family members, countless businesses will be impacted in this fashion, losing their ability to keep parents property taxes and parent to child exclusion in California, when  taking advantage of Proposition 13 and Proposition 58, working through a loan to an irrevocable trust… a Prop 58 transfer of property. 

The great fear is that the next step politicians who oppose Proposition 13 and Prop 58 will take, after opening the door to unraveling property tax relief for businesses, will be to go after property owners’  ability to take advantage of property tax transfer, or the transfer of parents property taxes upon inheriting property taxes in general.  The anxiety running through the state concerns fear that critics of 1978 Proposition 13 now pushing a property tax measure called Proposition 15 (formerly entitled Proposition 13 “Split-Roll” tax) will feel free to go after the right to avoid property tax reassessment, or parent to child transfer and parent to child exclusion in California, if Proposition 15 actually passes in November, 2020.         

Obviously, this will impact all Californians, raising rents, throwing prices of goods and services throughout the state completely off the map of normalcy.  If these folks do not begin looking at this issue more realistically, they are going to step into a deep statewide quagmire of economic quicksand, if this property tax passes in November.

Although politicians on the state level claim that their revised version of the true Proposition 13 property tax relief system, they’re calling “The Split-Roll  Proposition 15” property tax, includes a “small business exemption” that will supposedly fix everything. Don’t believe it.  We suggest you don’t drink the Cool-Aid!  This new property tax on commercial property owners in California will be crippling, to most  businesses and commercial entities, including landlords, in California.  The revised measure supposedly expands the “reassessment exemption” to small business owners with property valued at $3 million or less, up from the initial $2 million threshold.  Sounds like double-talk to most of us. 

One of “us” being the talented, courageous Rob Gutierrez, President of California Taxpayers Association. Mr. Gutierrez says that these supposed “protections” for small businesses aren’t even close to being strong enough to allow these folks to survive – with thousands of jobs for Californians not able to survive in the bargain! More people on the Unemployment Line.

“Because so many small businesses rent as opposed to own their commercial space… higher property taxes on the buildings they rent space in will of course result in more expensive rent for them”, says Mr. Gutierrez… “What that translates into is higher prices for consumers and brick-and-mortar stores. Dry cleaners, grocers, companies that cannot move, will have to find a way to pass these costs on.”

And as usual, who does this get passed on to? That’s right. Us. The consumers.

Faced with higher property taxes, commercial property owners with leases will assuredly be motivated to pass these increased costs on to their tenants.  They’ll have no choice.  For example, the owners of shopping centers or strip-malls, with numerous commercial tenants, if unable to avoid property tax reassessment or parent to child exclusion in California, will without question be compelled to increase rents on their commercial and industrial tenants. Next step, prices on goods and services go up literally overnight.  

So we can only further assume that adding a new property tax to the already heavy burden carried by residents of this great state will only serve to make current economic challenges only more challenging   for regular middle class Californians.  There’s no doubt about it.  Hence the need for California to keep the property tax system as is… Leaving the status quo alone.