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

California Proposition 15 2020

Let’s project ahead for a moment…  In terms of the state you may live in, of the best way to avoid inherited property being a money pit (in terms of property taxes and upkeep), of it being a home you cannot afford to keep… So let’s keep it simple.  If every state in the union adopted the same sort of property tax relief that California has, with the right to keep parents property taxes, where you can avoid property tax reassessment, as with California’s 1978 Proposition 13, and Proposition 58 voted into law in 1986; we’d all be in good shape.

In a perfect world this wouldn’t be all that difficult to attain, if every state would wake up and smell the coffee, and instate property tax breaks like California has.  Frankly, if we all had representatives in  the Congress and Senate who actually cared about their job and cared about doing their job for us – this could easily be accomplished, if the will was there. 

Why shouldn’t every state offer property tax relief like California? It’s like dental care.  Why doesn’t every healthcare plan have genuine dental care?  Not $1500 owrth and then you’re on your own, but real dental.  Can with property tax relief.  Why shouldn’t every property owner in every state have property tax relief to make their life easier… While billionaires and multi-millionaires enjoy outrageous tax breaks every year.

Every  beneficiary or heir inheriting property from parents, or simply  residents or landlords or business folks owning property, would be able to afford to keep their commercial property, or an inherited home from parents.   As in California, this affects all types of property transfers… Giving every beneficiary the ability to keep parents property taxes, or benefiting from property tax transfer, inheriting property taxes – from parents’ low tax base of 2% thanks to Prop 13… This is the property tax base that helps property owners so profoundly in California.  Why not in every state?  

Without property tax breaks, as California has had since 1978, so many heirs to so many estates, or beneficiaries of so many trusts… in so many different states, 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. Often against their will.

We can simply call it “property tax relief”, the right to keep parents property taxes, similar to what you can accomplish in California; with Proposition 13, or during property tax transfer, utilizing CA Proposition 58 – keeping property taxes much lower, avoiding property tax reassessment. Beneficiaries who are inheriting property in any of the 58 counties in California, always have a low tax base not to exceed 2% from California Proposition 13, giving beneficiaries huge tax benefits from property inherited from a parent.

Plus there is always the ability to make good use of a loan to an irrevocable trust – as trust loans from trust lenders are used in conjunction with Proposition 58 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 experience for everyone in an estate or trust situation with a trust loan from a reliable trust lender. Instead of experiencing, repeatedly, problematic family conflicts revolving around property issues like this.

Just like in California, every state in America should be able to take advantage of 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, or an older person simply maintaining property you have owned for years, 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 California Proposition 13 and Proposition 58.  Beneficiaries everywhere agree wholeheartedly.

However, one gets the sense that every property owner may not be fully aware of all these tax benefits in California. The CA Proposition 13 tax shelter benefits during and after property tax transfer (with CA Proposition 58) saves beneficiaries big bucks, being able to transfer parents property taxes, being able to keep parents property taxes… inheriting property taxes that are capped.  We should never forget that   in California it’s just as many middle class people as wealthy folks who are able to avoid property tax reassessment at present day evaluation, through Proposition 13 benefits… And that saves you major money every year off property taxes… typically in the neighborhood of $6,200+ per year in fact.  Not a million dollars, but then again not nothing either!  

PART ONE: Trusts, Intra-Family Loans & Property Tax Benefits in California

California Proposition 58

Many beneficiaries in California who are inheriting property, and seriously considering trust loans with Proposition 58 to nail down a low California Proposition 13 property tax base… working in conjunction with Prop 58 (property transfer from parents) or Proposition 193 (property transfer from grand parents)  insures an iron clad property transfer tax shelter. Naturally, this provides a solution to a conflict that many estate heirs and trust beneficiaries often run into… with respect to buying out sibling beneficiary property shares, while locking in a low property tax base rate forever.  

This may not sound like much to some folks, but in fact it frequently makes the difference between being able to keep an inherited property, or losing it to the tax man or in a foreclosure due to yearly property taxes that aren’t able to avoid property tax reassessment, and consequently are much too high for a typical middle class property owner to maintain.

Trust loans are used by numerous beneficiaries of trusts, and probate estate heirs, who wish to buyout a co-beneficiary’s interest in a trust-owned home, business property, or land, where certain beneficiary siblings have decided to retain their inherited real property – while other siblings firmly stand their ground, preferring to sell their shares in an inherited property to an outside party.  A trust loan often provides a worthwhile solution to this type of family conflict, so one beneficiary, or several, can buyout other beneficiaries that are looking to sell.  

What is so interesting and unique about this type of estate or trust financing is the fact that the entire process is so different than the usual inheritance funding process, involving trust advances and probate loans. Best to side-step the “wealthy families only” firms, and to run with a trust lender that has a reputation for treating all clients as VIP customers, welcomed into a family-like atmosphere, regardless of the size of their loan.  Like the cloanc.com outfit in Newport Beach.  Naturally, a company like that is quick to secure a loan against real estate owned by the trust, which is a logical first-step, and tends to set clients’ minds at rest, letting everyone know that the process is proceeding forward in a common-sense, professional manner.  

This is completely different than the usual inheritance funding process, which uses the entire estate, real property plus cash and investment estate or trust assets, to supply heirs with an inheritance cash  advance “assignment”, rather than an actual “loan”.  Trust loans that work in conjunction with Proposition 58 serve a very different purpose, and a trustee must approve the trust loan of course, and sign off on the deal.

Beneficiaries and property owners should typically do their own solid  research on this process; on business oriented websites that are easy to understand,  such as Proposition 58 and Prop 13 focused site that offers a professional atmosphere, and provides clear, easy to digest information in an accurate, no-nonsense way… or a free resource site that covers a wide range of property tax relief issues; or even in articles on sites that can be trusted for accuracy, for example at Barrons, in an article like:  “How Family Loans and Trusts Can Create Big Wins”…  Focusing on: “…interest rates at historic lows — for the time being — wealthy families are turbocharging their estate-planning strategies by pairing intra-family loans with trusts… As long as interest rates stay low, many families with taxable estates can similarly benefit from cleverly structured trusts and intra-family loans…”  

A different use of trust loans, as we can see —  yet still a step away from conventional loans; bringing a trust and loan funding into the family mix… With trust loans and Proposition 58 moving the process into an entirely new arena, without the necessity of the involved  family being wealthy, should you be a well-off or middle class property owner or a new  beneficiary in the state of California.