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

California Property Tax Changes

California Property Tax Changes

Even without California’s ill-advised Split-Roll property tax measure looming over every renter and residential as well as commercial property owners’  head throughout the sunshine state — California has already been grappling with lopsided expenditures such as over-spending on state & local government  salary increases, healthcare benefits, and lavish vacation time… Rather than budgeting properly for public works that would actually be beneficial for regular every-day Californians rather than folks with elite government positions.

Residents of this state are already dealing with unusually high taxation (other than property taxes), and other challenging regulations that make it difficult as it is for California businesses to compete effectively in a number of important and popular industrial and commercial playing fields.  

Let’s face facts… an $11 billion Split-Roll property tax increase  on business and commercial property owners would, without question, prevent businesses based in California from hiring new employees;  and would make it more difficult to retain existing employees.  

And you can forget about Christmas bonuses and/or timely raises, not to mention maintaining proper levels of health coverage!  It’s obvious that stability and predictability provided by 1978 Proposition 13 property tax relief has helped businesses in California to compete on a national level regardless of the fact that doing business in California is expensive to begin with!

Even if correctly managed, tax assessments will mirror the ups and downs of  the real estate market in  California— resulting in volatility, the way things were prior to 1978 when Proposition 13 was passed into law.  During low economic times this would most likely end up leading the state into an even more severe loss of revenue. 

If you think back… during the 2008— 2009 recession, commercial property values dropped by over 35%, mainly due to the economic recession.  These abrupt and  unpredictable economic shifts are what motivated unease and unhappiness among California property owners before 1978, and ultimately led to the big win pushed by the Howard Jarvis Taxpayers Association and others, leading ultimately to the passage of  Proposition 13 in the first place. 

Proposition 13 stabilized the property tax revenue system by capping property taxation at 2% plus nailing down property owners’ right to avoid property tax reassessment… with other stabilizing influences,   rules and iron clad regulations favoring the taxpayer for the first time.

Much to most beneficiaries’ surprise, it also became possible for estates to entertain certain options, where none existed previously; such as beneficiaries who were intent on retaining inherited property from parents now being able to buyout siblings that wanted to sell their property shares… Through a loan to an irrevocable trust, working alongside CA Proposition 58. 

Trust loans have become popular throughout California, to resolve heated sibling “inherited-property conflicts”, working in tandem with CA Proposition 58,  once those beneficiaries looking to keep inherited property actually qualified – enabling their co-beneficiaries to buyout siblings’ shares of a home usually… typically called a “beneficiary buyout of sibling property shares”.

While at the same time the siblings keeping the home were now able to legally avoid property tax reassessment, by using a trust loan to buyout a sibling’s share of an inherited house – or, as realtors call it, “a transfer of property between siblings” or “sibling to sibling property transfer” – whereas regular middle class folks simply refer to the process as “getting cash from a trust loan to buyout siblings’ shares in inherited property”.  Most people prefer to keep things simple.  As we do.

It  was unthinkable that the bad old days would even have even a remote chance of returning…  Until now. 

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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.

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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.

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

California Real Estate

California Real Estate

As the Coronavirus crisis worsens and deepens month after month, and the death toll rises, crunching up the economy in every state, like a giant invisible lawn mower, paralyzing the real estate market, and shredding other businesses, throughout California and the entire country… With millions of Americans filing for unemployment every week – property owners in every state in America should be looking closely at how property tax relief is accomplished in California, inheriting property taxes from parents; how these types of tax breaks would benefit folks in other states.

At least in California there is a cure for conflicts between sibling  beneficiaries – usually revolving around who wants to sell an inherited home, versus who insists on retaining that property, given emotional and sentimental ties.  And these sibling conflicts can get very, very ugly. 

However, when you mix these “sell or keep” inherited property issues with normal up & down sales cycles in the real estate market as a whole… with shrinkage in home sales being blamed on seniors retaining property, supposedly “all elderly and wealthy”,  and with Proposition 13 taking the lion’s share of the blame – with the focus on avoiding property tax reassessment, taking advantage of parent-to-child transfer of property, inheriting property taxes from parents; or parent-to-child exclusion as realtors refer to it (meaning exclusion from present-day tax rates).  Clearly, these illogical allegations do not add up. 

It’s clear to most Californians (with the exception of the folks that write for the San Francisco Chronicle and the Los Angeles Times; and the special interest politicians that they support) that the 1978 Howard Jarvis supported CA Proposition 13 property tax relief serves the wealthy and middle class alike – and might be just the thing American home owners need right now, floundering in the throes of an unprecedented Pandemic, to take some financial pressure off most Americans, who obviously are not wealthy.

Property tax relief would be especially important and helpful to  residents of other states who have been furloughed at zero, or 50%, salary due to the Pandemic… Or who are unemployed, yet still must pay property taxes on time, with no payment plan allowed, under duress, without a Proposition 13 or Prop 58 type of tax break to help them out in a time of great need.

In states other than California, home owners whose property is not free and clear, who are paying off a mortgage right now plus paying off high property taxes – are particularly in severe trouble as the virus rages across America and the world.  With a lack of federal leadership in the United States causing even greater economic difficulties  and personal tragedy.   

Naturally, from the point of view of California home owners and business owners, keeping their property tax rate at a low and  predictable 2% maximum cap is as American as apply pie – and most property owners questioned will agree this type of tax relief should be passed into law in every single state in America.  No questions asked. 

Moreover, it’s obvious to most Californians that renters in California also benefit from Proposition 13… And agree that if the Split-Roll property tax were passed  in California and business property owners including landlords lost their property tax breaks  afforded by Proposition 13, we’d see rents go sky-high all across the state, from San Diego and Los Angeles, up to San Francisco and Santa Barbara.

And despite what various  newspapers in California say in Editorials about Proposition 13 – this is not a rich person’s tax shelter.  It’s strictly an “everybody” tax relief measure. 1978 Proposition 13 (not to be confused with the “coincidental” Proposition 13 Split-Roll business and commercial property tax) holds property taxes down every year to a 2% cap, thankfully, or  a great deal of Californians would not be able to afford to hold on to inherited property from parents. 

Now that the Covid 19 virus crisis is on the rise again, then off, then on again… unpredictable and burning through the job based economy like a giant Los Angeles brush fire gone out of control – it’s obvious that every state in the  union needs to have property tax breaks like the CA Proposition 13 parent-to-child exclusion, as realtors call it… as well as property tax transfer tax-relief made possible by the 1986 California Proposition 58 tax shelter, where  beneficiaries of trusts and heirs of estates inheriting property taxes from parents will often opt for a loan to an irrevocable trust, and end up paying low taxes on property tax transfer from parents – having the right to transfer parents property taxes to themselves, upon inheriting property taxes from their Mom or Dad. Plus the ability to keep paying low yearly property taxes for as long as they retain that inherited property, as well as secondary inherited properties, if they are inherited as well.. 

What other state makes property tax relief like this possible?  In a word… none.  Why is property tax relief available in California, and  yet nowhere else in America?  This is exactly what Americans need right now, in a recession that looks more and more like a depression that is a direct byproduct of a Pandemic no one was prepared for, and that leaders were late in the game to address.

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