A New Threat Arises ~ Critics of Property Tax Relief Look to Unravel CA Proposition 58 with (2020) Prop 19

Vote No Proposition 19

A Threat to Proposition 58, Parent to Child Exclusion, Arises

If they were keeping both eyes open, most property owners in California were looking, tentatively, for signs on the horizon of any new threat to the popular property tax break known as the “parent to child exemption, or “Prop 58 parent to child exclusion”… Meaning, exclusion from having your home, or any other property, reassessed every year at current property tax rates.  Being that this exclusion is the the main foundation  that property tax relief in California is built on, if you were serious about dismantling property tax relief in this state, it would be likely that you’d go after this critical tax break in earnest.

So naturally, at the last moment, when everyone thought they might have  “dodged the bullet” in terms of efforts to dismantle Proposition 13 or Proposition 58 one more time, relentless critics of California Proposition 13 and Proposition 58 decided to add one more measure to the mix, to remove the parent to child exclusion allowed under Proposition 58, from California home owners… A measure they are calling Proposition 19.  Very short sighted! 

These measures also kill off our right, in conjunction with Proposition 58, to get a loan to an irrevocable trust and keep a low property tax base forever, from parent to child transfer, also called parent to child exclusion or parent to child exemption… with the ability to transfer  property between siblings or buyout siblings’ share of inherited property.  Proposition 15 kills off landlords’ tax breaks and so have fun watching your rent go sky high, landlords will have no choice to stay in business!  In fact everything will go up in price, all goods and services as we have said many times. 

Proposition 19 kills the exemption we just mentioned, the CA Proposition 13 protected parent to child transfer… in other words transfer of property between family members… No more ability to transfer parents property taxes (in other words, their low tax rate becomes your own low tax rate). Inheriting property taxes will be no more, and you’ll be spending over $6,000 more every year in property taxes.  No joke.  You won’t be able to keep parents property taxes any more, property tax transfer will be no more… no more ability to avoid property tax reassessment.  That’s the killer.                          

No longer being able to avoid property tax reassessment would be a truly devastating event for home owners who depend on extra spendable cash freed up by the money they save from the lack of property tax reassessment.  Losing the parent to child exclusion, in an already hyper-expensive state, would devastate millions of Californians.  Not to mention the possibility of the so-called Split-Roll or “Proposition 15” commercial property tax, which would certainly add to the devastation by raising industrial and commercial property taxes, including apt. building landlords, forcing landlords to raise rents on residential and business tenants…

Or we could talk about trust beneficiaries or estate heirs losing their ability to get  a loan for hundreds of thousands of dollars to an irrevocable trust to buyout siblings who are intent on selling their share of a beloved inherited home, along with establishing a low property tax base made possible by Proposition 13, working in tandem with Proposition 58.  And the list goes on. 

Without being partisan or subjective – it’s fairly clear to any reasonable person that would herald in grave economic disturbance, and even disaster, for the entire state, where middle class  and working class people are concerned.   Obviously, many residents in Malibu or  Beverly Hills or Santa Barbara would not be feeling the pinch.  However, we’re not talking about the 1%.   

This brainchild of C.A.R. and the CA Legislature is, if you step back and think about it, not only brazen but also short-sighted, as they are actually looking  to fund special interests with revenue from property taxes — right smack in the middle of a Pandemic.  With over 6.7 million Californians having signed up for unemployment checks, these critics of property tax relief want to remove these universally popular property tax breaks protected by  Proposition 13 and Proposition 58.  Benefits that middle class and working class California families have become  accustomed to, and depend on. 

Proposition 58 Particulars

Most Californians are familiar with Proposition 58 and the Prop 58 parent to child exclusion. As you know, California Proposition 58 serves to protect folks who owe $8,500 or more in additional property taxes, while they settle their affairs. Prop 58 also allows beneficiaries who wish to keep inherited property in their family to buyout co-beneficiaries’ property shares, through a trust loan, and helps those looking to keep their inherited home also keep a low Proposition 13 protected property tax base their parents paid. And everyone goes away happy, win-win, all the way around.

In 1986, to protect families from massive property tax hikes, voters passed Proposition 58, revising the California constitution to ensure transfers of property between parents and children could be executed with the right to avoid property tax reassessment. Under Proposition 58 property of any value, plus additional property with up to a million dollars of assessed value, can be transferred between parents and children without reassessment.

However, the chief sponsor of ACA-11 (Proposition 19) the California Association of Realtors (C.A.R.) came along and decided to spoil all these critical win-win protections. C.A.R. assembled enough signatures to get their initiative on the ballot. Apparently, C.A.R. is motivated by their monetary interest in drumming up new home sales, regardless of the fact that the measure creates a multi-billion-dollar tax increase statewide, will throw the entire middle class California economy into chaos, already in turmoil due to the Covid-19 health and unemployment crisis…

The 2020 Proposition 19 would look to repeal the 1986 Proposition 58 parent to child transfer (property tax break) and impose reassessment of inherited or transferred property within families. The one exception being if the property was used as the principal residence of the beneficiary to whom it was transferred, and that exclusion is even capped.

Unintended or Intended Consequences?

The Legislative Analyst’s Office (LAO) estimated that the repeal of the “inter-generational transfer protections” guaranteed by the Prop 58 parent to child exclusion, and Proposition 193 grandparent to grandchild exemption would, if passed, cause somewhere between 40,000 to 60,000 families in California to be crippled economically by higher yearly property taxes.

Obviously, most middle class families would be forced to immediately sell an inherited home left to them by a surviving parent. Thus, a serious imposition has been placed on the “right to choose” for countless middle class families… simply so realtors can sell a few more homes on the market.  The trade off does seem to be rather uneven.  If Proposition 19 passes, all those beneficiaries in California will be expected to move in to their parent’s home and make it their primary residence within one year of their surviving parent’s death. 

The basis for this measure is unrealistic on its’ face, for a number of reasons… Many beneficiaries are already home owners, and pay out a fair amount of cash every month already to maintain their own mortgage and/or property upkeep. Moreover, if a beneficiary has a large family, and his or her parent’s home is not spacious enough – what alternatives are left for these folks?

If Mom or Dad’s home is situated a long distance away from a beneficiary’s place of work, and/or the spouse’s workplace – and perhaps inconveniently far away from their children’s school, adding possibly an additional 60 or 90 minutes on the freeway each way, back and forth every day… What options will these families have to look to? 

Critics of property tax relief in California are proposing somewhat unrealistic measures that, although they may look good on paper from a financial perspective,  they fail to incorporate realistic issues and scenarios that exist for regular people with regular lives. 

So vote your conscience in November.  We suggest you vote “No to Proposition 19”.

Information and Trust Loan Funding

For more details on the C.A.R. originated Proposition 19 effort to turn back the clock on property tax relief in California, you can go to CaliforniaProposition58.org

For more information on trust loans working in concert with Proposition 58, go to Commercial Loan Corp   Or to apply for a trust loan and speak to an account representative, go to “Apply for a Trust Loan”…  Simply to read up on Prop 13 and Prop 58 parent to child exclusion, as well as on critics of property tax relief in California,  plus the Covid-19 effect on real estate throughout the state – please go to the article: Coronavirus Crisis is the Last Thing the California Real Estate Market Needed!

PART TWO: The CA Proposition 15 Split-Roll “Trojan Horse” Commercial Property Tax is Coming Up for a Vote!

2020 California Proposition 15

Gifting & Inheriting Property: Property Tax Relief Basics

Gifting your primary house, or secondary inherited property to your adult children – is it worth it?  We imagine for many it is, otherwise why would they do it?  And for others, well… what can you say, it’s simply a matter of subjective opinion.  And let’s never  forget that under Proposition 13 in California you can get the same low tax base benefits applied to your first primary residence inheritance to a secondary inherited property.  So there are built in benefits. 

Also, there are emotional reasons not just financial ones involved in all this…  It’s a real gift of love that often leads to an even closer relationship. And your offspring should realize that, and most probably do. In simple terms, it may be a principal residence, and that type of transfer may actually cause future tax appreciation of the value of that home, as a taxable item, when it might otherwise have avoided property tax reassessment if the property had remained in the decedent’s name with Proposition 13 transfer of property tax relief benefits. 

Nationwide Property Tax Relief Urgently Needed for Residential & Commercial Property Owners in a Severe, Pandemic Economy

This is the biggest problem for most beneficiaries, middle class  property owners and elderly home owners – i.e., property taxes; transfer taxes; etc.  This often forces folks to sell a beloved inherited property, as they simply can’t afford to pay the taxes on it every year, deal with utilities, upkeep, repairs, and so on.

We should all address the fact that, especially now, in the midst of an unprecedented Pandemic, with literally tens of millions of Americans out of work or  under-employed – with over 12 million people staring down the dark tunnel of foreclosure or eviction – every state in the union should be adopting, without delay, the same sort of property tax relief as California’s 1978 Proposition 13, as well as other critical property tax relief measures such as CA Proposition 58 property tax transfer benefits, voted into law in 1986.

At the risk of stating the obvious, it’s worth noting that these tax relief measures have become life-savers to property owners, as well as renters who enjoy lower rentals due to the ability their landlords have to avoid property tax reassessment.  We’re all aware of what things were like pre-1978, before Proposition 13 came about and began preventing the frequent foreclosures of the 1970’s, where we saw numerous elderly widows with fixed incomes being thrown out of their homes, literally onto the street, because they could not afford to pay egregiously high, unpredictable property taxes.

In fact, most middle class home owners at that time had trouble paying unusually high tax rates, and lived year to year with the shadow of the California ‘property tax guillotine’ looming over their heads.  In fact that is exactly what the situation looks like in many states now,  or in many expensive counties.  This is where the major problem is with most middle class estates, not with estate planning. Without property tax benefits, as in California, many beneficiaries inheriting property from parents simply can’t afford the upkeep and property taxes on an inherited home, and frequently are forced to sell their parents’ property right away. Often against their will.
 
We hear a great deal of chatter lately, among realtors and real estate attorneys in various states, about “adopting a property tax shelter” for all property tax transfers, when inheriting a home from a parent.  Or we can simply call it “property tax relief” similar to property tax benefits that are taken for granted in California; with Proposition 13, or during a property tax transfer or a sibling property share buyout; utilizing CA Proposition 58, and a trust loan – keeping property taxes much lower on a permanent basis, avoiding property tax reassessment basically forever.  

Beneficiaries who are inheriting property from a parent or step-parent  in any of the 58 counties in the state of California are generally protected from property tax reassessment. And have a low tax base to look forward to, not to exceed 2% as stipulated by California Proposition 13.

And let’s not forget having the ability to make good use of a loan to an irrevocable trust, working in concert with Proposition 58, something a lot of people don’t know anything about. With trust loans from trust lenders being used to equalize cash to beneficiaries looking to sell an inherited property held up by beneficiaries of the same trust, looking to keep the same inherited home and/or land… For once making scenarios like that a win-win situation for everyone associated with an estate or trust, with a trust loan from a reliable trust lender. Instead of experiencing problematic family conflicts revolving around property issues. 

Residential & Business Property Tax Breaks in All States

Beneficiaries and home owners, as well as commercial and industrial property owners of all types, all across America, should be getting familiar with the way they implement property tax breaks in California. How they handle having the right to keep parents property taxes, to transfer parents property taxes, when inheriting property taxes. If, by any chance you reside in California, and you happen to be a beneficiary inheriting property from your parents, consider yourself very lucky. This is why so many real estate lawyers in various locations these days strongly believe every state should have a property tax measure similar to Proposition 13 transfer of property and inheriting property taxes; and Proposition 58 property transfer tax benefits. 

So if every state in the United States had a Proposition 13 and Prop 58 type of property tax relief system… and could make good use of ancillary tax breaks such as buying out inherited property shares from siblings intent on selling out — through a loan to a trust, from a specialty trust lender; using a trust loan in conjunction with Proposition 58 to permanently solidify a low property tax base, made possible by Proposition 13; given the legal right (in every state, not just California)  to avoid property tax reassessment.

Therefore, every property owner in America dealing with inherited property in trust or in an estate; perhaps also addressing sibling conflicts revolving around who wants to keep inherited property versus who insists on selling, and who can buyout whom, using a trust loan, in order to keep inherited property in the family; avoiding property tax reassessment basically forever.  Everyone with these types of sibling property conflicts or property tax issues of any kind, even just the ability to pay them – would walk away happy… and for once all estate or trust family related conflicts would wind up as a win-win inheritance scenario, every single time these property tax measures were employed.

>> Click Here for Part Three…