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

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

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 FOUR: Irrevocable Trust Distribution Loans

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

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…

PART FOUR: Coronavirus Crisis is the Last Thing the California Real Estate Market Needed!

Corona Virus and Real Estate

Corona Virus and Real Estate

In the final analysis, we must admit that the Coronavirus crisis is in fact the very last thing we needed in California – given the chronic problems with the job-based economy, and conflicts within various markets – the troubled agriculture business and the real estate market, just to begin with. 

Since 2016, we could clearly see a  downwards cyclical trend in California, revealing shrinking home sales.  And for whatever reason, we’re experiencing a peculiar growing trend, featuring  conflicts between siblings and other family members within estates and trust funds, typically with real estate.. with less and less cash each year that goes by. 

These conflicts between sibling beneficiaries typically revolve around inheriting real property, with one or more heirs and/or beneficiaries wanting to take more than their fair share of inheritance assets… Moreover, we see a lot of sibling conflict  revolving around the question of who will retain inherited property, or will beneficiaries looking to sell that property to an outside buyer win that battle of wills…. Taking the estate into an area involving parent to child exclusion, and transfer of property between siblings, or buying out a siblings’ share of a house, also known as buying out siblings’ property shares or sibling-to-sibling property transfer.

Interestingly enough, it is only in the state of California where you have property tax relief which actually looks like tax savings set up specifically to deal with economic problems brought about by the Pandemic – in every state… Put forth and passed by Lawmakers that actually care about the well being of the American people. 

CA Proposition 13 and Proposition 58 would actually be excellent tax break solutions for folks in every state right now, with a relentless Pandemic causing death and mayhem, both with our health, and with our job based economy.  This type of property tax savings for American home owners would be right on time – where you can keep parents property taxes, transfer parents property taxes, while inheriting property taxes at a low 1978 Proposition 13 base rate… Having the ability to use Proposition 58 property tax transfer benefits, with parent to child transfer or, as lawyers call it, “parent to child exclusion” – covered on trust lender Websites…   Property owners in every state should be learning more about these types of tax benefits, on official Websites such as the official California State Board of Equalization site; or at one of the free, well researched, well vetted niche California tax relief resource blogs like this site.  

It’s important to learn how trust loans work alongside reliable  Proposition 58 or Proposition 193 property transfer tax break benefits, making it possible to establish and retain a low Proposition 13 tax base with parent to child exclusion guaranteed; upon any  beneficiary buyout of sibling property shares, or as realtors call it, “the transfer of property between siblings”, and “lending money to an irrevocable trust“ – typically from an irrevocable trust loan lender with a solid, reliable reputation.

Learning about these tax breaks, and how they work with trust loans or without… will strengthen residential and commercial property owners’ ability to communicate  the right data points to their so-called representatives in Washington… with the hope that one of these days, sooner than later, we’ll start to see property tax relief being established in every state in this country, just as they have in the state of California. 

And yet  now with all the problems in the real estate market brought about by the Coronavirus Pandemic, with home sales on the wane as potential buyers cancel house viewings, or flat out decide against risking a large down payment and pricey monthly mortgage payment due to fears that they may lose their lucrative  white collar job in the very near future… Or that their investments in the stock market or in CDs may plummet any day soon.

With the Coronavirus crisis literally paralyzing the real estate market, and the retail as well as service industries in California; and elsewhere, doing exactly as it wishes to do with us essentially, as we continue to flounder.  With absentee leadership and misinformation costing thousands of fatalities, and an economic disaster getting more and more serious by the day. 

Looking at this issue realistically, we’re now talking about 45 million people filing for Unemployment. 2,415,000  jobs lost just in April 2020 alone as an example, and similar losses before and thereafter, as months go by and the virus deepens it’s effect on our way of life.  With tens of millions of people out of work.  We’re now talking about almost double the number of Americans unemployed during the Great Depression, which was over 25 million.  Let’s look at California, given the plunge of the real estate market due, to a large degree, to the Coronavirus crisis.  

California home sales fell to the lowest level since the last “Great Recession” as the housing market suffered the full impact of the Coronavirus Pandemic in May and sales remained below 300,000 for the second straight month, the California Association of Realtors informed us recently.   May 2020 home sales in California decreased 13.9% from 277,440 in April and down 41.4% from 12 months ago, when 407,330 homes were sold within that year. It was the second straight month that home sales dropped below 300,000 units. Additionally, the past year’s plunge was the largest drop in home sales since the Recession beginning in November 2007, contributing to a sales drop of 12.9%

It’s odd that experts are warning us that California could see a 20% increase in homelessness if this current economic downturn continues month after month. We may see as many, if not more,  evictions and foreclosures in California than we had during the last  “Great Recession”.   Not only that, with bread lines continuing to mushroom all across America; teeming with Americans in long lines of cars… apparently in their 6th or 10th or 12th week of unemployment, what would help residential and commercial property owners would be property tax relief similar to how it’s done in the great state of California. 

This is precisely the tax relief model that should be reviewed by Congress as a serious non partisan, non political Emergency Disaster Relief Measure… being that California the only state in America where you can still  avoid property tax reassessment at current rates; capped at 2% taxation, thanks to the original 1978 CA Proposition 13.

Websites that focus on California Proposition 58, on property tax transfer and on how trust loans from trust lenders work for estates   with property conflicts between siblings… equalizing distribution of cash, as real estate attorneys put it – so all beneficiaries walk away feeling they got what they wanted, and that it was win-win for all concerned.  This would give beneficiaries and home owners alike enough info on property tax transfer and parent to child exclusion, and property tax relief in general, to put their demands in writing to Congress…  and demand property tax relief as part of the Coronavirus Stimulus Package!  It would certainly make a great deal of sense right now, no question about it.