The Trust Loan Proposition 58 Process – Interview with Abraham Ordaz, Account Representative at Commercial Loan Corp

California Proposition 58 Parent to Child Property Tax Transfer Trust Loan Specialist

On Oct. 2nd, 2020, Property Tax Transfer Trusts sat down with Account Representative Abe Ordaz from Commercial Loan Corp, in Newport Beach, California; to discuss his routine with trust and estate attorneys, trust administrator and beneficiaries, explaining the trust loan / Proposition 58 funding process…

Property Tax Transfer:  Abe, thank you so much for sitting down with me today to chat about your work at Commercial Loan Corp and how you assist clients when it comes to using California Proposition 58 to transfer a parents low property tax base to a child who is inheriting a home.

Abraham Ordaz: Sure, my pleasure.

Property Tax Transfer:  Abe, who do you generally speak to when it comes to taking calls from prospects?

Abraham Ordaz: I speak to a variety of involved parties when it comes to helping a client transfer a parents low Prop 13 property tax base from a parent to a child. Often times the conversation begins with a Trust Administrator or a Trust Beneficiary who is interested in using Prop 58 to transfer a property tax base from a parent to a child on an inherited property. After that initial conversation it is common for me to also have a conversation with the Trust & Estate Attorney who is assisting them with the distribution of the trust or estate. On occasion they do not have an attorney who is currently working with them and I am able to refer them to one in their area who is familiar with the Proposition 58 Parent to Child Property Tax Transfer process and who can help them secure their property tax transfer benefit. At Commercial Loan Corporation we have helped hundreds of clients by providing them with a loan to an irrevocable trust so that an equal distribution can be made and they can meet the requirements set by the California Board of Equalization to qualify for the Proposition 58 property tax transfer benefit.

Property Tax Transfer: Are your clients and attorneys usually familiar with trust loans, and how they work with the California Proposition 58 process?

Abraham Ordaz: Many of the Attorneys that I work with are familiar with the Proposition 58 process, as well as Proposition 13 and the need for a trust loan to equalize a distribution when a trust or estate does not have sufficient liquid assets. In fact, many of my clients are referred to me by their trust and estate Attorney. We are one of the only California Trust and Estate Lenders who will lend directly to an Irrevocable Trust with no personal guarantee from the acquiring beneficiary and we are the only California lender that I am aware of that specializes with these types of transactions to help clients secure their Proposition 58 property tax benefit. That is the reason why I receive so many Attorney referrals.  The Attorney wants to make sure that their client is in good hands and that the process is done correctly so that the client will qualify for the Prop 58 parent to child exclusion from property tax reassessment. Often times we help clients save more than $6,000.00 per year in property taxes on an inherited home. 

Property Tax Transfer: Abe, that is fantastic that you have developed such great relationships with Trust & Estate Attorneys.  Do you usually provide them with an estimate on how much you would be able to save their clients when it comes to property taxes?

Abraham Ordaz: Yes, we provide a free cost benefit analysis for each client. It tells them exactly how much we expect their client to save in property taxes each year as opposed to if their property were to be reassessed. At that time we also provide them with a free quote for the trust loan so that we can make sure it is in their best interest. In most cases it is of great benefit and we generally save our clients over $6,000 per year in property taxes by helping them keep a parents low Prop 13 property tax base.

Property Tax Transfer:  That’s significant. Do you get into the various particulars with Proposition 58, and  how that works in concert with loans to trusts?

Abraham Ordaz: Yes, we break everything down into very simple terms so that the Proposition 58 property tax transfer and trust loan process are all easy to understand. That is one of the reasons why so many Trust and Estate Attorneys who deal with California Proposition 58 love to work with us. 

Property Tax Transfer:  Got it. Abe, how do you help your clients who are interested in keeping a parents low property tax base on an inherited home understand how the trust loan and Proposition 58 parent to child transfer benefits work, keeping the initial inheritance property transfer taxes down, buying out siblings’ property ownership shares, and so on?  Yet keeping it very simple.

Abraham Ordaz: I start with the basics of Proposition 58 and the California Board of Equalization requirements for a Parent to Child Property Tax Transfer. I then help them determine how much their trust or estate will need in order to make an equal distribution. After that we review all the numbers together and I answer any questions they may have on the process. Next we get their Attorney involved so that they can handle all of the legal aspects of the Proposition 58 parent to child exclusion and provide us with all of the required information for the trust or estate. Lastly, we provide them with the funds needed so that an equal distribution can be made in order for them to meet that qualification requirement for Prop 58. The Attorney or Property Tax Consultant then helps them submit their property tax transfer request to the County Assessors office so that they can secure their parents low property tax base.  

Property Tax Transfer:  At the end of the day it’s really just all about saving money on property taxes for clients, isn’t it. It’s a complex process, but the motivations remains very simple, doesn’t it?

Abraham Ordaz: Yes, bottom line, it’s a simple matter for these clients and lawyers.  It’s all about how we can help clients save money on property taxes – to keep their family home. I help explain all this clearly to the heirs that want to keep their inherited property. 

Property Tax Transfer: Yes I see.  Abe, how do you explain why the trust is so crucial to this entire process?

Abraham Ordaz: Typically when attorneys ask about the trust loan process – I tell them our loan goes directly to the trust… and follows the property.  Conventional lenders want to take to take the property out of the trust – but once the property is taken out of the trust, this often triggers a reassessment…  So if you took a cash loan from a traditional bank for example – you’d end up putting the property in the beneficiary’s name and thus get reassessed at current property value. Which in most cases raises the property tax rate significantly. If  the property was purchased say 20 years ago, the property tax would be significantly higher today. 

Property Tax Transfer:  Got it.  Abe, do you get into the customer service aspect at all?  I understand that a very special kind of customer service is critical to this process, to be successful, so to speak, with each family.  

Abraham Ordaz: Yes… Customer service is the most important aspect to our business and we try to be our best version of ourselves for every client regardless of the size of the loan. Everyone is treated equally and respectfully.  Everyone that joins the Commercial Loan Corp family, as it were, is a V.I.P. client!

Property Tax Transfer: That’s very interesting and a rare thing to find these days in this business climate. Well, we want to thank you so much for sitting and chatting with us today.  We really appreciate it.

Abraham OrdazIt’s my pleasure. Thanks for having me.

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…

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

California Proposition 15

The battle in California between supporters of property tax relief and critics of property tax breaks for Californians, still drags on in tedious fashion… specifically concerning  Proposition 13 (in short, the ability to transfer parents property taxes, with the right to avoid property tax reassessment; with a parent to child exclusion – capped at 2% maximum tax rate) as well as  Proposition 58 (in summary, Prop 58 helps heirs buyout sibling property while providing low rates on property tax transfers for beneficiaries, with a long-term low Prop 13 property tax base through a trust loan, while avoiding property tax reassessment at present day rates).

Critics of California property tax relief still repeat the same old talking points, like parrots, opining on the exaggerated need for cash from property taxes to “save the drowning school system from disaster; etc.”  Whereas their Proposition 15 Split-Roll property tax would in fact be the very thing that would bring about economic disaster in California. 

Split-Roll supporters even added a deceptive “exemption” from two to three million dollars in property value as a promotional trigger point, hoping that this deceptive and confusing formula will succeed in unraveling  tax breaks for owners of industrial facilities and commercial properties – which they are now calling “Proposition 15”… a safe, innocuous sounding title that is actually cloaking a rather toxic, sinister process  that would begin the slow, poisonous destruction of property tax relief in the sunny state of California.

Knowing that going after residential property tax benefits would be something like going after the popular Medicare program or the even more popular Affordable Care Act… Likewise, you don’t directly attack popular property tax benefits that millions of people love and depend on – first you start nibbling at the edges… then you work your way inward, towards destroying the center.  It looks to us like that is exactly what is going on in California right now. 

Like the Post Office nationwide, for example… if you dismantle the system internally, mail won’t be delivered on time, no matter what anyone tells you to the contrary.  Sometimes things are exactly as they seem to be!  So no matter what anyone says, after dismantling property tax breaks for commercial property owners, the next step is clearly to unravel property tax relief for home owners.  Sometimes things are exactly as they appear to be.

Once critics of property tax relief start in on affluent landlords who own business rental properties, they won’t stop until they dismantle middle class commercial property owners… and then, of course, wealthy and then middle class home owners – until every single middle class American is scraped clean!  Easy prey for them. Low hanging fruit. They call it a “wealth tax” in some states, and in California they’re calling it a “split-roll” tax. A new way to get more money from us, basically.  One way or the other.  It’s a similar ploy to ramp up and increase tax revenue they want us to pay.  It’s plain to see.

It was retired, older couples and elderly widows who were being kicked out of their homes (that they resided in for 4, 5, 6 decades), basically due to unpaid or under-paid property taxes in 1974 and 1975, 1976… before Proposition 13 was finally passed by voters in 1978, thanks to Mr. Howard Jarvis and friends, at the Taxpayers Association in California.

Now, with Proposition 15, formerly the “split-roll” tax, underway – this time it will be middle class and working class “mom & pop” shops and consumer businesses renting store-fronts and offices in leased buildings, or Uber drivers who are home owners… who will be harassed by the Tax Man, and ultimately displaced, with nowhere comfortable and safe to go!   

Wayne Lusvardi says in CaliforniaGlobe.com: “Proposition 15 – the so-called split-roll commercial and residential tax hike – on the November ballot, is being advertised as solely a commercial property tax. But there is a Trojan Horse contained in Proposition 15 that will unravel Proposition 13 property tax protections even for residential properties.

Single-family residential homes used for home offices or UBER drivers who park their cars at their owned residences will have their homes reclassified as commercial properties under proposed Proposition 15. Eventually, property taxes will be equalized by the legislature, and the mandates of Proposition 15 will apply to all owners who hold multiple homes and apartments, not just commercial properties. Moreover, small business owners will have the higher property taxes passed through to them in the form of higher rents and will not be able to stay in business after a couple of years.”

And guess who will pay the ultimate price for this so-called “split-roll” property tax? Higher commercial property taxes… Wait, let’s re-phrase that – MUCH higher commercial and industrial property taxes will ultimately be paid by the consumer. All of us.

Why?  All the services and goods you have grown to depend on will go way up in price thanks to business, industrial and commercial property taxes going up – landlords renting our store space and office buildings will have no choice but to raise their rents to survive, and subsequently their tenants, who own gas stations and super markets and stores and strip-malls, and office buildings all over California, will have to raise their prices to keep from going flat out of business within 10, 12 months. 

Moreover, this move would most likely open the door for critics of commercial and industrial property tax breaks, to eventually attack and unravel consumer property tax relief, including Proposition 58.  As we all know, Prop 58 helps heirs buyout sibling property with the use of a trust loan, while locking in a low Proposition 13 property tax base, more or less forever.

Hence, if this new property tax passes… that sound of air whooshing out of a balloon you hear will be the air whooshing out of the economy all across the once great state of California. 

>> Click Here for Part Two…

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.

CA Proposition 58 & the Trust Loan Process: An Interview With Trust Loan Specialist Ken McNabb

Status

Loans to Irrevocable Trusts in California

Kenneth McNabb is an Account Representative at the Commercial Loan Corporation in Newport Beach, California. We began the interview by asking Ken to address a central issue in this field, namely communicating a rather complex process in very simple terms:

Property Tax Transfer: Hello Ken, how do you disseminate the information you want to get across to prospects and new clients? In order to address financial issues that beneficiaries need to know, to resolve what are often complex financial concerns?

Kenneth McNabb:  I tend to give general information at first, to give potential clients a solid overview… And try to determine exactly how urgent the the financial issues are, that are driving the folks I’m talking to.

Property Tax Transfer: What do you do with a family that appears to be at an impasse, for example cannot agree on the value of an inherited home?

Kenneth McNabb:  When no one in a group of siblings can agree on what the value of a home should be I typically suggest we create a Cost Benefit Analysis and have an appraisal conducted. Plus I make sure I know who wants to sell an inherited property, and who wants to keep the property… and nail down their low Proposition 13 tax base. Everyone wants that low property tax base to be intact forever, of course. Most people do not realize that they can actually save a considerable amount of money by taking out a trust loan to keep a home as opposed to having to pay realtor fees, closing costs and repair costs involved with selling a home.  In fact we save our clients on average more than $40,000.00 when compared to selling a home. That does not include the annual tax savings of over $6,200 by taking advantage of California Proposition 58!


Property Tax Transfer: When in the estate or inheritance timeline do these siblings tend to contact you, contact the firm you work for?

Kenneth McNabb: Some are urgent to get the money right away to buyout siblings…. Some even call us before anyone even passes away! Sometimes it’s a week after the death of a parent… Sometimes it’s a year after someone passes away.

Property Tax Transfer: What is the most important thing in an estate situation like that, that comes to you all mixed up and in conflict?

Kenneth McNabb: The most important thing is the loss of a parent. That’s number one. But also, they all generally agree right at the beginning that they all want to lock down a loan to a trust, to buyout a sibling… to keep an inherited property, and most importantly to make sure they nail down that low Proposition 13 tax base their parents had. Those items are always in the picture as important, even critical, elements. 

Property Tax Transfer: And the next most important thing?

Kenneth McNabb: Well, I suppose that would be – what it means to inherit property from a parent. As maybe a once-in-a-lifetime, singular event.

Property Tax Transfer: Yes, it’s definitely a profound event. Tell me, who do you primarily deal with in your average family group? Typically.

Kenneth McNabb: Not counting the exceptions… Typically, I’m generally dealing with “the captain of the team”. The trust administrator, the person who wants to retain the parents home or oldest sibling. On occasion one of the siblings in an attorney and I will deal with them.

Property Tax Transfer: What does that person, that spokesperson, typically want, most of all?

Kenneth McNabb: I’d have to say that they want to keep the low CA Proposition 13 property tax base. Plus be able to buyout the sibling or siblings who want to sell their shares in that property.

Property Tax Transfer: What about Proposition 58, getting approved, and how it all works in conjunction with a trust loan, besides securing a low CA Proposition 13 property tax base… How do you explain all that? As I see it, this is the key to success in this business. If they don’t “get it” the first time around, they usually just walk away, don’t they? People often push away what they think they can’t understand.

Kenneth McNabb: My job is to make sure they understand this process within the first 30 seconds of the conversation! As usual, I keep everything as simple as possible. I explain Proposition 58 and securing a low CA Proposition 13 property tax base in very, very simple terms… Letting them know, in plain English, without a lot of confusing technical jargon, how an exclusion functions for the property – from parent to child… I always ask them, in simple language, “Would you rather pay property taxes based on the day their parents’ bought the property… Or get hit with a super high current tax base, and pay what would be reassessed now, today…” I suppose you can guess what their choice generally is!

Property Tax Transfer: Right. Doesn’t take a genius to figure that one out!  Everyone wants that low CA Proposition 13 property tax base. Now, although you’re dealing with more or less non-conventional lending issues… How do you deal with non-conventional loan requirements? Where approval is concerned – along the pathway towards final approval for these folks.

Kenneth McNabb: Since we are lending to the trust and not to an individual in most situations, the loan process is very fast and easy.  In fact, we can often close a loan in as little as a week; providing we have received all of the required paperwork. 

Property Tax Transfer: What is the Continuing Legal Education all about? Is that for Trust & Estate attorneys only?

Kenneth McNabb: Commercial Loan Corporation specializes in loans to trusts to help our clients utilize Proposition 58 to keep a parents low Prop 13 property tax base. After doing this for so long, we have become very knowledgeable on California Proposition 58 matters. We partnered with Michael Wyatt, a California Property Tax Consultant that worked in a California Assessors office for over 15 years. Together, we created an authorized Continuing Legal Education course that Attorney’s may take to meet their California continuing legal education requirements.

Property Tax Transfer: Thank you for taking the time to speak with us Ken. If one of our readers needs assistance with California Proposition 58 or has questions about a loan to an irrevocable trust, how may they reach you?

Kenneth McNabb: They can either call us at 877-464-1066 or inquire right on our website.  We are always happy to answer any questions that they are their Attorney may have on the trust or estate loan process.  We can also provide a Free benefit analysis which shows how much each beneficiary will save by using a trust loan to keep a home as opposed to selling it. 

 

PART FIVE: Coronavirus Crisis in California Motivating State Politicians to Push Unpopular “Split-Roll” Property Tax

Property Taxes In California

As we get close to wrapping up this six part report on the devastating affect the Coronavirus crisis has  had on the California economy, and the housing market throughout the state, let’s clarify one thing – not all the news is negative.  There are positives, or upsides, in view.

California, unlike most other states in America, still provides citizens with property tax relief benefits from Proposition 13 and Proposition  58 with loans to trusts (or loans to irrevocable trusts), the legal right to transfer parents property taxes when inheriting property and inheriting property taxes.

With Proposition 13 and Proposition 58, California gives beneficiaries and property owners the ability to keep parents property taxes no matter how low the base rate is — upon property tax transfer…. with parent to child transfer or, as estate lawyers refer to it, “parent to child exclusion”.  No other state gives citizens property tax breaks anywhere near this type of property tax relief.  So no matter how challenging things get as a result of the current health crisis, Californians can always turn to these property tax benefits for positive options when dealing with inheritance assets such as real property, trust loans, sibling property buyouts and related matters.

Aside from that, there are a series of objective, updated conclusions and assumptions that the California Association of Realtors has recently provided; that they want residential and commercial as well as industrial property owners, and beneficiaries, to be aware of:  

(a) Mortgage rates are expected to remain low, or even go lower, as Coronavirus outbreaks continue nationally, as well as in California.   Therefore, economists anticipate that this will most likely help lower the cost of borrowing money and this is expected to make housing more affordable over the short term, which, if this projection is accurate, will help mitigate some of the uncertainty and negative impact on housing demands in California.

(b) Potential home buyers might be discouraged by increasing uncertainty and fear of oncoming recession. However mortgage rates recently fell to an all-time low of 3.13%. Down from 3.80% at the beginning of the year, representing cost savings over the life of a 30-year loan. These anticipated short-term economic risks are genuine,  however they may be offset by the long-term benefits of lower rates for individual borrowers.

(c) Economic volatility in California may lower demand for luxury housing, as overall household wealth declines; however this volatility may also create unique opportunities for luxury home buyers. With less luxury buyers in the market, there could be opportunities for price discounts for buyers who remain in the high-end market.

(d) Demand from foreign home buyers could be vastly reduced. As domestic buyers generally finance homes in much larger proportions to their foreign counterparts, low rates could be stimulating more domestic demand in California – offsetting the negative impact that typically goes hand-in-hand with foreign buyer demand.

(e) Much of California’s Building Industry materials are purchased from Asian countries such as Japan and China or Malasia. As the Coronavirus crisis disrupts these supply chains, the cost of these materials may increase over the short-term and become limited, thereby increasing cost of construction and reducing the pace of already tightening residential development in 2020 – 2021.

(f) Improved affordability may emerge from lower rates plus fewer new homes being constructed – as the material supply chain is impacted. This may lead to an upward pressure on home prices in California. Unsold inventory is already at low levels, so reduced construction means that is likely to continue – especially if buyers respond to lower rates.

(g) The situation in California remains fluid, and conditions could deteriorate beyond the current severity of the virus outbreak. Yet if   current economic forecasts of modest declines in GDP growth are realized, the effects of lower rates should help offset the effects of a slow economy with increased economic uncertainty so  California could still experience improved home sales and prices this year.

It’s clear that the Coronavirus is having, and will continue to have, a material impact on the California economy, and in particular the housing market through 2020 on into 2021… However, it is also safe to say that this is not necessarily the right time to panic.

The effect of lower rates will help to offset some of these movements in the housing market, and forecasts of economic growth by the California Association of Realtors and other organizations have been revised in a  downward direction, but only by tens of basis points – not hundreds.

The situation in California remains fluid; therefore C.A.R. along with attentive and realistic economists at the Public Policy Institute of California or Howard Jarvis Taxpayers Association, and other responsible organizations, will certainly be closely monitoring all of these property matters and financial issues… and will be providing all of us with accurate data, as updated information continues to develop and surface.   

>> Click Here: To Continue to Part Six…

PART ONE: Coronavirus Crisis in California Motivating State Politicians to Push Harder for “Split-Roll” Property Tax

California Property Taxes

The Coronavirus crisis is having a profound effect on various social-economic facets in California, however we will be focusing to a large degree on the real estate market, residential and commercial property issues, and property tax relief.

Moreover, the Coronavirus Pandemic has also apparently infused new support for the Split-Roll property tax in California, to pursue what would without question (if passed) be a “Pyrrhic victory”.  For those of you who might not know what that means, it’s a victory that results in such devastation to the so-called “victor” that the outcome may as well be an actual defeat! Named after King Pyrrhus of Epirus, his army suffered irreplaceable casualties in defeating the Romans at the Battle of Heraclea, in 280 BC.

At any rate, if this misguided property tax measure wins by vote in November at the ballot, many politicians and newspaper editors falsely believe that this revision to the commercial property tax code will “raise billions of dollars for cash-strapped schools and California counties”… with no negative downside. 

Now there is where they are taking the wrong turn in the road.  They even have California Secretary of State Alex Padilla drinking the Cool-Aid, and  taking a stand as primary cheerleader for this tax on middle class small business property owners, modest landlords, and so on. 

Yes, some large cash-rich corporations and wealthy business property owners and landlords will be impacted, of course.  But the critics of Proposition 13 and Proposition 58 tax relief still are continuously attempting to convince  all of us that everyone affected by a business or commercial property tax will be super rich, and therefore it won’t really matter.  

Not so. Not even close to being so.  Sure, a Split-Roll property tax will affect some wealthy commercial property owners… but many  commercial properties are owned by middle class landlords, or even upper middle class commercial property owners basically leveraged to the hilt.  But wealthy?  No.  

In fact, many of these property owners and landlords are just “getting by” – and a property tax like the one these anti property tax relief politicos and newspaper editors want to impose on commercial property owners with the falsely named “Proposition 13” property tax (“coincidentally” with the same title as the 1978  genuine Proposition 13 tax relief measure… simply to confuse voters) would surely serve to destroy hundreds if not thousands of these modest or small business property owners.  With the end result being widespread foreclosure and bankruptcy, obviously.

Not to mention business tenants having to deal with increased rents they will no longer be able to afford… and so all of these goods and services from one end of California to the other will increase virtually overnight!  And we’ll discuss these disastrous side effects later on in this six-part article.

Interestingly enough, none of these critics of the authentic 1978 Proposition 13 tax relief measure acknowledge that any of these negative and dangerous outcomes are a realistic possibility.  They dance around the fact that small businesses and most landlords  in California will not be able to absorb immediate rent increases due to property tax reassessment. 

On the other hand, if small businesses in California aren’t able to raise prices – they will most likely be forced to cut internal costs, which will include cutting employee compensation and benefits, and/or laying off employees.  So we’ll have even more people out of work.  And some of these small businesses, and perhaps larger businesses as well, will have to relocate, or worse case scenario will go completely out of business – creating an oversupply of commercial space AND higher vacancy rates, which would cause commercial property rents and values to actually decline.  Yet another hidden problem. 

This will end up decreasing  job opportunities in California, due to decreased economic activity overall throughout the state. 

This is the guaranteed downside of the Split-Roll tax that, believe it or not, Secretary of State Padilla and other political critics of property tax relief in California are not looking at.  They would do well to start looking… or they are going to step into a disastrous quagmire of their own making, if this property tax actually passes in November. 

Another key point to consider, while we’re on the subject.  Even though politicians on the state and local level claim that a “revised  Prop 13 with Split-Roll tax” includes “a small-business exemption” – it would be advisable to not buy into these vague promises from local politicians whose word is highly suspect at best!  A suspect Split-Roll tax with a reassessment exemption that is highly questionable is only for the most naive of us to believe. 

A Split-Roll tax, supposedly only imposed on commercial property owners in California will be deeply crippling for many if  not all businesses and commercial entities that own business property in California.  The revised property tax 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.  Frankly, this sounds like double-talk to most of us.

One of “us” being Rob Gutierrez,  President of California Taxpayers Association. Mr. Gutierrez says these supposed “protections” for small businesses, a Split-Roll tax with a reassessment exemption that isn’t even close to being strong enough to allow these business owners to survive… with thousands of jobs that would have been for Californians, down the drain!  More people on the Unemployment  Line.  A Split-Roll tax with a reassessment exemption, that is basically worthless. Next, when we’re not looking, they’ll target consumer property tax relief, as well as Prop 13, avoiding property tax reassessment; and Proposition   58 property transfer tax breaks and trust loan tax benefits from trust lenders… That’s their playbook.

“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”, Mr. Gutierrez says… “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, plus lay workers off…” 

And as usual, who does this get passed on to?  All of us.  The consumers.

>> Click Here: to Continue to Part Two…

PART FOUR: Irrevocable Trust Distribution Loans

Irrevocable Trust Distribution Loans

Stronger Family Security With Lower Property Taxes

As beneficiaries and heirs in California inherit family real estate, they are also inheriting property taxes. They generally transfer parents property taxes; taking advantage of property tax transfer – which attorneys often refer to as parent to child transfer or parent to child exclusion… thanks to Proposition 13; and Proposition 58 which also enables beneficiary buyout of sibling property shares.

Regrettably, siblings in California who are trying to keep property left to them by parents, frequently find themselves involved in emotional and financial conflict with co-beneficiaries who wish to sell their inherited property to an outside buyer.

Fortunately, many siblings looking to retain that type of emotionally based property for their family will often be able to buy out beneficiaries looking to sell their property shares with the help of a trust lender providing a loan to an irrevocable trust, typically referred to as a beneficiary buyout of sibling property shares. 

As many Californians know by now, a trust loan, working in concert with CA Proposition 58 tax relief, makes it possible for beneficiaries to sell shares of their inherited property, also called a “beneficiary buyout of sibling property shares”, which is typically just buying out a sibling’s share of an inherited house, maybe with an acre or two of land – or, as real estate lawyers refer to it, “the transfer of property between siblings” or “sibling to sibling property transfer” – by lending money to an irrevocable trust – typically from a seasoned California irrevocable trust loan lender, commonly called trust lenders, simply specializing in trust loans of all sizes.     

Property tax transfer benefits furnished by CA Proposition 58, provides a parental property transfer tax break typically called “parent to child transfer”… whereas CA Proposition 193 provides the same type of tax relief, only for grandparent to grandchild property tax transfer – while California Proposition 13 maintains their parents low property tax base, capped at 2% for beneficiaries, thankfully avoiding property tax reassessment at current tax rates basically forever, which adds up to significant numbers over the years and decades.

Beneficiaries, with these sort of inherited property conflicts, are usually motivated to save on property taxes, and generally enlist the help of a known trust lender in California that is experienced with loans to irrevocable trusts, plus utilizing California Proposition 13 and the Proposition 58 property transfer tax break. Exactly as the O’Neil family wished to do, as it happens with the help of a company called Commercial Loan Corporation.

If qualified, and over 55 years of age, many property owners involved in this exact process can also apply a significantly lower tax rate to a secondary dwelling, as long as they own the initial inherited property for 2 years or longer.

Rules, Regulations and Critical Steps for Irrevocable Trust Loans – in Concert with California Proposition 58 or Proposition 193:

1. Deciding who will keep the property
2. Determining final trust loan amount
3. Loan to trust/estate is executed
4. Trust lender equalizes cash distribution to beneficiaries
5. Property is transferred to acquiring beneficiaries name
6. Parent child exclusion is filed, avoiding property tax reassessment
7. Five to seven day trust funding turnaround is expected
8. The trust loan is repaid, finalizing a win-win family agreement
9. No Hidden Fees

An Alternative Lending Solution for Heirs and Beneficiaries

Both beneficiaries featured here, of the O’Neil family, discovered the Commercial Loan Corp with the help of their real estate attorney. They were both extremely motivated to get a $267,000 trust loan underway as quickly as possible.

The personal issue that appeared to motivate the initial call to the trust lender, besides saving money on property taxes, is the fact that both beneficiaries have wanted to keep this property in the family for a long time – to pass the property on to a daughter, enabling that daughter to keep the property as well. She wouldn’t be able to afford this property if the taxes went up, so it was essential that they reserved a low Proposition 13 driven property tax base.

Accepted assessed value of the inherited property was $400,000. Annual property tax savings was estimated to be $1,970. One beneficiary wanted to keep the property, with the other beneficiary looking to sell to an outside buyer, however both siblings appeared to get along well and basically agreed on all key points, of both minor and major importance – and after no time at all agreed to keep the property, as soon as Senior Account Executive Tanis Alonso from Commercial Loan Corporation explained the tax savings and the trust loan and Proposition 58 combined process to them, in simple easy-to-understand terms.

Both siblings agreed that their positive childhood memories were attached to the house they were inheriting, and this was important to retain, and maintain, for both siblings emotional and financial well being.

Bottom line, the cost of selling the property outright to an outside buyer would have been $24,000. Cost to the O’Brien family using the Commercial Loan Corp loan-to-trust process (i.e., not having to sell the property), while happily being able to keep their parents beloved  home forever, at a low yearly tax rate, which is only $10,602. Savings for the O’Brien siblings was a significant $13,398.

If you have questions about a loan to an irrevocable trust, you can reach Tanis Alonso at 877-464-1066.

PART ONE: Why is California the Only State Where Trust Loans Can Equal Low Property Taxes for Life?

TRUST LOANS

In every American state but one, in all 3,143 counties in America,  trust funds have the reputation for being a rich person’s tool for deferring and/or lessening taxes…  And that one state where trust beneficiaries have more options, are in fact actually able to receive or assign funds outside the “normal” distribution schedule, with trust loans for a buyout of sibling property shares, for example – is California and all its’ 58 counties.   

Despite the fact that beneficiaries of  trusts in California are totally blocked by a Spendthrift Clause that is written into most California trust funds, therefore are unable to get an inheritance cash advance assignment – they can, with the help of the California  Proposition 58 tax break, if they are inheriting real property from parents, inheriting parents property taxes capped at 2% thanks to CA Proposition 13 – get a large  trust loan to work with.

As most of us know, beneficiaries in California have the right to  buy out co-beneficiaries’ (typically siblings) shares in an inherited property through a loan to an irrevocable trust.  Siblings that, for example, refuse to retain an inherited property, and are inflexibly intent on selling to an outside buyer.  Moreover, the same access to additional distribution options like a trust loan, exist for business property owners as well… Which is why there has been so much push-back against the co-called  2020 “Proposition 13” business property tax being floated  out there for California property owners to vote on.  As you can guess, this is not a popular tax!

That is precisely why so many people love owning property, and residing in, the state of California. If you’re inheriting property in California from your parents, and it’s in trust, as we mentioned,  even if the ever-present Spendthrift Clause prevents you from obtaining a probate advance or inheritance cash advance assignment from a standard inheritance advance company – you can always set yourself up with a low tax rate for your inherited property… plus get cash from a trust loan within five to seven days generally.

Every other state in the union should, by all rights, have property tax breaks similar to Proposition 13 and Proposition 58, for parent to child transfer of property, or Proposition 193, for grandparent to grandchild property transfer

However, California is, sadly, the one lonely state where you can avoid property tax reassessment, capped at 2% with Prop 13… Plus keep parents property taxes and transfer parents property taxes, inheriting parents property taxes at super low base rates. With the ability to use Prop 58 property tax transfer, with, as real estate lawyers usually call it, “a parent to child exclusion”.  Why?  We imagine it’s simply a matter of lack of leadership to pave the way, and put pressure on local politicians, as Howard Jarvis did in the mid to late 1970s –  hitting paydirt with the CA Proposition 13 tax break in 1978! The history of which can be found here.

So the great thing about inheriting property in California is that you can not only buy out beneficiaries share of an inherited house – you can also keep that contested property from parents, with a trust loan, and wind up paying incredibly discounted property tax as long as you retain that property – plus apply the same tax break to a secondary property as well, if you’re in that position, and can afford to upkeep that home or property as well.  As discussed on business sites such as Commercial Loan Corpwith articles and interviews that dig into trust loan issues using Proposition 58 as a tax break solution

As you most likely already know, this makes it possible for a beneficiary to buyout  shares of inherited property from another sibling, or co-beneficiary – which lawyers call “a beneficiary buyout of sibling property shares” – or “buying out a sibling’s share of an inherited house” – or, as realtors refer to it, the “transfer of property between siblings” or “sibling to sibling property transfer”. Always through an irrevocable trust loan lender you feel comfortable with, that you know specializes in trust loans, various uses of trusts, estates, and inheritance assets.

And the catch is, that you always need a trust lender to help you determine and assemble all the complex requirements needed to get approved for the California Proposition 58 equal distribution process. The trouble is, it doesn’t happen by itself – something that many beneficiaries don’t fully understand, when they start out down the road with this process.

>> Click Here to Continue to Part Two…