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

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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. 

 

Dramatic Savings for Californians, with a Positive Affect on Personal Net Worth, Family Bonding and Peace of Mind

Not to over indulge in generalizations, however when you consider the Proposition 58 tax break, or Proposition 58 property transfer tax relief, in simple human terms, you can clearly see how this type of tax relief allows concerned middle class parents, many of whom without this tax relief would frequently not be able to afford to maintain homes in addition to their own primary property, enabling their young adult children to reside in a safe neighborhood, often nearby; frequently giving middle aged and elderly parents a great deal of peace of mind.

Due to Proposition 58 property transfer tax relief, parents are also able to transfer a primary residence, or perhaps other properties they may own, to their children – without their property being reassessed at market value for state taxation purposes.  Obviously, the difference between having this type of tax relief to take advantage of, as in California; or not having it, as in most other states – can be quite significant.

Click here to look further into details regarding Proposition 58, parent to child transfer, and avoiding property tax reassessment

A home in California that is owned and maintained by the same family over decades, transferred to offspring… is generally assessed at a fraction of the current value of the house and land. This typically makes it possible for young adult, and older adult, children of middle class parents, to raise their own children in a safe middle class environment, as well as saving thousands if not tens of thousands of dollars per year.

The type of key financial support that Proposition 13 and Proposition 58 afford home-owning families in California, often helps to keep a tight knit family closer together, to choose to live nearby as opposed to settling for a less expensive and less desirable dwelling, often far away from family. As we often have noticed, multiple home ownership by doting parents often reveal homes that are near each other — thereby preserving an even tighter family bonding fabric, while establishing a safe environment for the parents’ grandchildren to grow up in.

Whereas if children, and grandchildren did not have this form of tax relief enabled by Proposition 13 and Proposition 58, allowing property transfers without crippling property tax increases – they very well may have had to settle for a less attractive, less safe neighborhood, often far away from the parents, and often exposing children to less desirable elements, and school systems.

The most popular, or well known, scenarios affecting peoples’ lives directly in California; qualifying homeowners for a Proposition 58 tax exclusion, including the transfer of real property:

(a) from parents to children;
(b) from children to parents, as individuals;
(c) from grandparents to grandchildren as individuals;
(d) between joint tenants;
(e) from trusts to individuals;
(f) from individuals to trusts.
(g) to or from any child born of the same parent(s);
(h) to or from any step-child, any son-in-law or daughter-in-law; or any child who was adopted prior to age 18.

Naturally, the most popular scenarios enabling qualification for “property exclusion” include property transfer by inheritance, by gifting, or by sale.