Does Prop 58 Actually Exclude Transfers of Property from Reassessment?

Crucial Property Tax Breaks: “The Parent to Child Exclusion”

It would be worthwhile for a professional polling organization in California to conduct a objective poll or survey to see whether homeowners in particular are now more appreciative of the gift they were given in 1978 with Proposition 13 as well as Proposition 58 and how that excludes from reassessment transfers of real property between parents and children, used in conjunction with trust lenders such as the Commercial Loan Corp… referred to as a “Parent to Child Exclusion” or “Parent to Child Transfer” as attorneys like to call it. h

We believe it would be clear from such a poll that Californians now  see more clearly that such precious property tax breaks, more or less taken for granted for decades, are now under direct threat… from numerous organizations, such as the CA Association of Realtors (C.A.R.), the Governor of California and the California Legislature itself, supposedly sworn to protect the rights and financial well being of the general public and not of special interest groups such as C.A.R., California Conference Board of the Amalgamated Transit Unions; California Nurses Association; California Professional Firefighters of California; State Federation of Labor; California NAACP State Conference; California Senior Advocates League; California Statewide Law Enforcement Association; Californians for Disability Rights; and the Congress of California Seniors; just to name a few.

Clearly, seniors, to name one of the larger demographic groups, initially bought into the rather deceptive and confusing messaging concocted by promoters of Proposition 19. And never stepped back to open the hood and examine the hidden data-points and details inside the actual tax measure itself… In other words, examining the steak – not the sizzle. The question is, are voters – seniors specifically – now struggling with buyers’ remorse?  A quick survey would answer that question. 

Only in California do you have property tax breaks for middle class property owners such as Proposition 58 and Proposition 13.  Only in California do you have tax benefits like the Prop 58 Exclusion that enables funding to irrevocable trusts; allowing beneficiaries to buyout co-beneficiaries’ shared inherited  property.  Plus, the ability to lock in a low property tax base, in line with Proposition 13, long-term. Ironically, in most other states,  domestic trusts are mainly used for the purpose of allowing affluent families to defer taxes, or to completely avoid paying certain taxes… frequently moving funds held in trust to overseas accounts. 

At any rate, basic California property tax relief still appears to be holding up, despite a few inconveniences imposed by Proposition 19… such as forcing beneficiaries inheriting a  home from a parent to move into that inherited property strictly as a primary residence, within 12-months – or lose the right to avoid property tax reassessment.

The only other option would be to sell the old home… Frequently at a loss. However, the property tax break is basically  the same as when Proposition 58 was passed by a large margin in 1986. A home and up to $1 million in assessed value of additional real property can be excluded from reassessment when transferred between parents and children. 

This keeps the property tax bill the same, with a few inconvenient additions thrown in to keep taxpayers from getting too happy, and we imagine to make realtors happier, if they are selling more properties, as a result of having more properties to sell.  Along with the CA Legislature, who undoubtedly will rake in more cash from property taxes, despite beneficiaries’ ability to take advantage of the Parent Child Exclusion or Parent to Child Exemption – despite some of the tricky new rules & regulations.  Some will not be able to partake of the Prop 58 Exclusion, and that will undoubtedly drive more cash into the state coffers…. which will make the tax assessors happier as well!

If certain beneficiaries inheriting their parents’ home and other property want to sell their shares, they would have to pay much higher property taxes over that average year and a half time-frame, from the date of death to the close of escrow – yet they can avoid owing on average $8,500 in extra property taxes if they are careful to utilize a trust fund loan in conjunction with the Prop 58 “Parent to Child Exclusion”.

These are invaluable options left to California homeowners and commercial property owners; which should be appreciated by residents of this state, as these property tax breaks are basically  unavailable anywhere else in this country. 

We suggest that Californians try to make the most of these gifts… and at the same time, as this is no longer business as usual due to continued efforts to take these property tax relief measures away from middle class property owners — do as much as possible to actively protect these tax breaks. 

As we have now seen, like democracy itself, there is a very thin line between maintaining property tax relief, and losing it forever.

 

Lowering Property Tax Rates for All Homeowners During the Pandemic

Lowering Property Tax Rates

Lowering Property Tax Rates

In California, Governor Gavin Christopher Newsom signed an executive order on May 6th, 2020, to extend the deadline for homeowners who were scheduled to pay their property taxes on April 10th – and to extend business property owners’ deadline of May 7 to complete and file their business property statement. This was supposed to “provide relief for taxpayers suffering financial hardship due to COVID-19”.  Moreover, Governor Newsom referred to his offer to taxpayers as “property tax relief…”

To be clear, we neither support nor oppose the governor of California here at Property Tax Transfer.  But when we hear something this blatantly disingenuous coming from any politician, we simply must question it.  Property tax relief is property tax relief.  Property tax relief is Proposition 13 or Proposition 58… Genuine property tax relief in California is the lessening, or  lowering, or complete elimination of – property taxes.  What Governor Newsom is referring to is not property tax relief… It’s  property tax deferment.  Putting off payment for a few months.  We would appreciate it very much if political leaders in California would not use such an important term as “tax relief” falsely.

Now, it is entirely possible that the Governor actually wanted to forgive payment completely for certain taxpayers. And under the severe conditions imposed on all of us due to the Coronavirus health crisis and resulting job losses, and lower income suffered by millions of workers in the state – the governor could very possibly have been besieged by political colleagues, and talked out of tax relief – into  tax deferment…  However, why not hold out and insist on giving taxpayers a real break through enhanced Proposition 58 and Proposition 13  – or actually forgive most of these property taxes completely for one  year, or at least discount them considerably?  According to state economists, it would not even have amounted to one quarter of the tax cuts the federal government gave to the wealthiest Americans two years ago!

Many economists have asked, why is it that  a few hundred billionaires and multi-millionaires recently received hundreds of thousands of dollars in tax cuts as “tax-welfare” and “corporate-welfare”, so to speak.  Yet, in the midst of an unprecedented health crisis, resulting in the worst job loss disaster since the Great Depression – 160 million middle class and working class property owners received nothing even close to the trillion dollar tax cuts afforded to just a handful of mega-wealthy families only a couple of years ago.

Many financial analysts in California have pointed out that the folks in power in this state did not mind shelling out trillions then – yet now on a state level, when middle class taxpayers desperately need an obvious financial boost such as a property tax cut, or property tax break, the best our state government can do is come up with an essentially useless  tax deferment proposal, and no actual tax cut… or tax relief.  These analysts do have a point.

Local government apologists claim that the $140 billion in property taxes that California typically receives every year is urgently needed right now to pay for essential pandemic services – to cover the cost of public health departments in 58 counties; to cover public hospitals; and – to pay for the school system, which is always sort of tacked on, as if they can’t find that money anywhere else. Local California government agencies insist that they stay open only due to funding that is largely based on… property taxes.

State agencies wrote a letter to the Governor, stating, “Delaying such a large infusion of general funds for two to three months would have a serious impact on their ability to provide these services.” They did not even want to go along with the proposal for deferment that the governor suggested! 

Some folks in the press wisely asked – is not keeping millions of Californians (many whom are elderly, and living on a fixed income) from being evicted and completely losing their home not anessential pandemic service”?

Gov. Newson has forced businesses to shut down, and most certainly will again, understandably and with good intentions – sending workers home to try to slow the spread of Covid 19. Admittedly, the pandemic is out of control in California, as it is in many red states. Folks in all these states want their “freedom”… and so it looks like they are therefore free to avoid wearing masks, free to contract Coronavirus, and free to infect others.

The Governor, ignoring this mass appeal for freedom, closed down businesses back in May anyway.  As a result,  many homeowners were not able to pay their property taxes. Companies all across California have closed to comply with Governor Newsom’s shutdown order to slow the spread of the Coronavirus that causes COVID-19 respiratory complications.   Yet if you’re going to close down those companies, hopefully temporarily, and send workers home at half or no pay – wouldn’t it make sense to then give those workers a significant financial break, as in increased property tax breaks… somewhere along the line, somehow? Such as Coronavirus Prop 58 and Proposition 13 property tax relief!

Certainly homeowners and beneficiaries inheriting property from parents can still get a trust loan to buyout co-beneficiaries, and lock down a low property tax base… but reinstating Proposition 58, in terms of the changes Prop 19 has brought about, and adding more teeth to existing property tax breaks that can save Californians significant amounts of cash every month… Would be so relevant during a pandemic, that it’s almost absurd to have to bring it up — when it’s not even in discussion in the Congress or  the Senate.  Not to mention the California Legislature.

So… when the governor calls a two or three month property tax deferment “property tax relief”… it’s no wonder that taxpayers reacted negatively.  Property tax relief refers to lowering the amount to be paid.  Not deferring the payment date!

Governor Newsom told us recently that more than 1.6 million Californians have filed unemployment insurance claims, which the state is struggling to organize and process, to get those checks out. It’s fine to send folks that are out of work unemployment checks – they have paid into that every working week.  But wouldn’t it make even more sense to give them all a property tax break, eliminating Proposition 19 restrictions in light of the Covid outcomes? Preferably forever… But at least as long as the Covid virus rages?

Prop 58 Loans

Prop 58 Loans

Prop 58 Loans and Loans to Equalize Trusts

It has been an interesting piece of California history, concerning people who have been  involved in the struggle for, or against, Proposition 19 in 2009–2010 which was not voted into law… as well as the next version of Proposition 19 in 2020, which was voted into law, just barely.

Moreover, Proposition 19, 2020 was promoted in a rather deceptive and  confusing manner, along with a measure called Proposition 15, which did not pass or, as you know – commercial property owners in California would no longer be able to avoid property tax reassessment.

As you also probably know, Proposition 19, 2020 managed to revise certain property tax breaks within Proposition 58, such as the “Parent to Child Exclusion, or, as tax attorneys like to call it, the “Parent to Child Exemption”.

At any rate, there was far too much focus on the recreational use of marijuana surfacing during the 2009–2010 version of CA Proposition 19. This battle descended into a petty conflict involving decade-old personal bias and social prejudice characterizing marijuana as a “socially destructive, addictive drug” (which it apparently is not, according to pharmacological experts) and placed in the same class as crack cocaine or meth-amphetamine, which are indeed socially and personally destructive drugs.

It does seem that the real purpose of Proposition 19 in the 2010 version, away from the grey area of “recreational use of marijuana” which the debate became mired in – was to try to generate $1.5 billion or more for state violent crime fighting needs.  Due to a great deal of personal bias, this never happened. Which is unfortunate, as the state could have used the extra money for legitimately battling violent crime associated with genuinely harmful drugs; as opposed to rather benign couch-potato pot smoking. 

Everyone who owns property in California regarded Proposition 58, voted into law Nov 4 of 1986, as untouchable, sacrosanct, a political third rail not to be touched. It has served to protect homeowners whose debt is at or exceeds $8,500 in additional property taxes, while settling financial affairs after a parent, who has left property to heirs, has passed away.  Proposition 58 also protects a property tax benefit called a “Parent to Child Exclusion” or Exemption, as we have mentioned… allowing beneficiaries inheriting property to avoid property tax reassessment at current market rates.

Moreover, Proposition 58 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 retain a Proposition 13 protected low property tax base that their parents paid.

With the advent of Proposition 19, after a long rather disingenuous marketing campaign, middle class families woke up to realize that some of the benefits they thought were fully protected have been watered down; that you will need to move into the house you inherit from parents within a year, as a primary residence, or lose your Parent-to-Child Exclusion.  So it’s still there… but you have to keep an eye on the calendar to avoid losing the tax break altogether. 

So all of a sudden, after both Prop 15 and Prop 19 were proposed… California property owners began to worry, for the first time in decades, about possibly losing the right to keep parents property taxes for themselves, at a nice low rate…It is unthinkable, as expensive as California is, with income tax and other taxes as high as they are – to even consider that we might ever lose our right to a property tax transfer from parents, at low Prop 13 rates; or transfer of property between siblings.  Fortunately for California, this did not occur.

After Proposition 19 was passed, Californians were extremely relieved to see that they would be still have the right to get a loan to an irrevocable trust, in conjunction with Proposition 58; to be able to buyout property shares from co-beneficiaries, as the same simple transfer of property between siblings – known as “buying out siblings’ property shares” or a “sibling to sibling property transfer”, when co-beneficiaries decide to sell their inherited property to an outside buyer.

It was most likely due to notable professionals who supported property tax relief and Prop 58, that Proposition 19 was prevented from going too far. This can be verified at fact-based property tax  blogs like this one, Property Tax Transfer,  and the new Op-Ed oriented micro-site, Loan To A Trust, specifically addressing issues, opinions and fact-based information on Proposition 13 and Prop 58 at Websites belonging to real estate attorneys supporting CA property tax relief, such as property tax specialists like Michael Wyatt and his team of specialists. And certainly thanks to Prop 58 experts and trust lenders with applications for a trust loan, for transfer of property between siblings… that look something like this: https://cloanc.com/apply-online
 
It goes to show us that with some stiff opposition to unreasonable tax measures looking to squash property tax relief in California – even with millions of dollars from the California Legislature and organizations supporting special interests like realtors, such as the CA Association of Realtors (C.A.R.), conspiring tax measure that  attempt to unravel Proposition 58 and/or Proposition 13 can be stopped.  Perhaps not completely; yet at least to a good degree.

California Proposition 58 & Proposition 19 Lenders

California Proposition 58 and Proposition 19 Lenders

California Proposition 58 and Proposition 19 Lenders

We all know it’s a period of time right now in America of great uncertainty, insecurity and stress… affecting many families, creating enormous tensions, frequently financial…  Even affecting family estates, when a parent passes away; and where ‘will contests’ can be a real problem for families – for example, sibling-A believing she/he should be getting more than sibling-B;  so on and so forth.  We see a lot more of this sort of family conflict lately, over the past few  years, than ever before.

Although we do, thankfully, have solutions in California to prevent such conflicts from descending into disaster. Some of these solutions are tied into getting approved for CA Proposition 58 so heirs can avoid property tax reassessment; as well as classic CA Proposition 13 property tax breaks, for California property owners looking to work around new Proposition 19 property tax obstacles that force homeowners to move into inherited property within one year or lose their “Parent to Child Exclusion”. This can be a stunning loss of property tax relief; unless we meet it head on, and are able to  successfully work around it. 

It seems it’s still possible to take advantage of the property tax transfer benefit from parents, with the ability to keep parents property taxes while avoiding property tax reassessment of course. Despite newly passed obstacles, we can still transfer parents property taxes when inheriting property – bottom line, inheriting parents property taxes at a low base rate the way Proposition 13 was intended!  

Firms like Commercial Loan Corp can help solve estate conflicts between beneficiaries; making it possible for us to buyout siblings with a “sibling to sibling property transfer”, siblings who want to sell their inherited property shares, while allowing us to keep the same mutually inherited property from parents – with a trust loan, at that low base rate.  As long as we get approved for Proposition  58, heirs can avoid property tax reassessment, as the California State Board of Equalization explains.  Or possibly at a niche property tax info blog like this one, Property Tax Transfer

As long as everyone gets the cash they were expecting with a trust loan, and/or end up with a nice low property tax base… everyone ends up in a win-win happy sibling scenario. As long as the ‘will contest’ can be resolved to some degree, and direct communications between siblings doesn’t completely fall part.

These conflicts have often dominated family structures, so much so that some family groups actually splinter apart… with some family members literally leaving California for ever.  Additionally, Southern California home prices are currently at record levels, which doesn’t help. 

Because of hyper expensive home pricing many people are moving from California to nearby states where cheaper real estate can be found, in decent middle class or lower middle class neighborhoods; including Texas, Nevada, Arizona, and in some cases Oregon and Washington, according to Jordan Levine, an economist at the CA Association of Realtors (C.A.R.), who says California residents leave to get out from under general California inflation and an increasingly expensive overall lifestyle that many middle class families simply cannot afford to sustain – in terms of buying a home, feeding a family, maintaining numerous cars and insurance plans, health coverage expenses; schools; you name it. 

It is ironic that C.A.R. (California Association of Realtors) produces a report describing elevated living expenses in the state of California, while they are in fact the chief sponsor supporting the recent Proposition 19 property tax measure, watering down  property tax relief for California home owners… contributing to the higher cost of living in the state… Obstructing the way heirs can avoid property tax reassessment by unraveling the “Parent to Child Exclusion” or Parent-to-Child Exemption, as realtors like to call it.

As a matter of fact, this past August, the median home price in California was up more than 12% from a year earlier, according to CoreLogic/DQNews. Experts say the median home price is being impacted by an increase in luxury homes along with the flexibility of remote working options, which also allows people to move away from places like Los Angeles or San Francisco, to nearby states, in rural areas where families can get more space and amenities for far less cost than in many populated areas in California.

California real estate is often significantly more expensive than other, nearby, states. But then again, so is property in states like New York, or Chicago, in Oregon,  Maryland or Massachusetts. However. At least in California, homeowners and beneficiaries inheriting property have been fortunate enough to have property tax breaks at their disposal since 1978 such as Proposition 13, maintaining a low property tax cap of 1% to 2 % max.

Moreover, since 1986 Proposition 58 has positively impacted property transfers and naturally property tax transfer, avoiding property tax reassessment on inherited property while inheriting property taxes from parents.  This  has actually saved homeowners in California tens of thousands of dollars over the years.  Hundreds of thousands, literally, over decades.

In fact, thanks to Proposition 58, trust loan based estate funding transactions save beneficiaries $6,000 to $8,000 or more on average, per family, every year.  No, it’s not millions… But for a regular middle class family it is definitely significant.   And if homeowners can’t access this type of benefit, it will hurt them financially year after year.

So even if we can buy a house more cheaply in a relatively inexpensive state like Ohio, or Idaho, South Dakota, North Carolina, or Wisconsin, for example… All comparatively less pricey than average property in many areas in California — we end up spending more anyway every year in property taxes in those other states. So we end up spending more every year anyway.

Property tax transfer, known as a parent to child transfer or parent to child exemption, will always be low, at 2% or less – if we continue to be able to avoid property tax reassessment.  With new property tax laws in place, if we miss that 12-month deadline to move into inherited property – then we’re right back in the financial vice known as “current market value”…

And, bless the California politicos who negotiated for us against the Legislature to at least retain enough of Proposition 58 so as long as we do get in under the wire, within that first 12-months after our decedent passes away… with 6-figure trust loan approval, we can, as beneficiaries, buy out co-beneficiaries’ shares of inherited property, which realtors call “sibling to sibling property transfer”, or ”transfer of property between siblings” and end up owning our own property anyway, without the problem of sharing real estate with siblings we’d rather not own property with.

Thankfully, although the timeline has now become more challenging, we can, as California inheritors and homeowners, still take advantage of tax breaks made possible by Proposition 58 and Proposition 13, in concert with an irrevocable trust — and buyout siblings,  so we can take over our own home at a nice low property tax base, more or less equivalent to the tax base enjoyed by our parents. Property tax relief in California may be a bit rocky right now… but it’s still there, if we use it carefully and judiciously.  And keep both eyes on that calendar!

Loans for Irrevocable Trusts

Loans for homes in an irrevocable trust

Loans for homes in an irrevocable trust

According to financial leaders who own firms that provide loans for irrevocable trusts and property tax relief programs, in concert with Proposition 58, Prop 193, and Proposition 13 – typically saving  homeowners over $8,500 in extra taxes every year – the news is that property owners in California should consider accomplishing any property transfers to heirs, that may be planned either as a sale, a gift or an inheritance, or a hybrid – prior to or by Feb. 15, 2021…

Feb. 15th being the final day one can access original Proposition 58 or Prop 193 property tax break benefits – to save money on the initial transfer, plus thousands of dollars on yearly property taxes, as the tax assessor comes around to collect, so to speak.  

To reiterate, as you probably already know, Proposition 58 allows parents in California to transfer property to their children without triggering a property tax reassessment. And as you most likely are aware, you must be the son or daughter of a parent that resides, and owns property, in California – in order to qualify for a “parent to child exclusion” (also referred to as a parent to child exemption) – from reassessment, in terms of the current market value of family owned real property.

Conversely, Proposition 193 allows grandparents to transfer property to their grandchildren, with a “grandparent to grandchild exemption” – without having to worry about current market property tax reassessment.  It’s worth noting that the Proposition 193 exclusion is workable only if the Proposition 58 exemption cannot be used.  In other words, to put it bluntly, parents of the grandchildren in question must be deceased.  That may sound harsh, however it is important to know the facts.

To be safe and secure, experts are telling us right now to be aware of certain changes to the Proposition 58 “parent to child exclusion” tax break – and to remain aware of time as a serious factor. We are told that we should view Feb. 15, 2021 as a formal deadline for completing a family property transfer or intra-family trust for a trust loan – not for paperwork signatures, or a postmark date. With potential county closures mounting up, the completion of this sort of transaction in person could very well continue to be a challenge, and backlogs affecting paperwork sent through the mail could be an issue at some point.  

As of February 16, 2021, family property transfers must be used as a primary residence, to avoid property tax reassessment at current market value; maintaining the invaluable right to avoid property tax reassessment.  Fortunately, Californians will still be able to take advantage of a property tax break as long as they are using inherited property as a primary residence, within a year of the passing of the decedent who is leaving the property to his or her children; typically as an inheritance.    

However, we do need to be aware that it is the next generation of property owners, in the future, that may incur higher property taxes due to new tax laws, or shall we say a revised version of the same   property tax break protected by CA Proposition 58.  The point being, with new changes to property tax law in California, with the right to avoid property tax reassessment being challenged and even partially unraveled, it has  become more important than ever to consult or work with Prop 58 and property tax relief experts that are knowledgeable in all trust loan, Proposition 58 and Proposition 13 matters… who maintain a grasp of property tax law changes, and how those shifts impact beneficiaries and property owners in the state of California.    

Home ownership for middle class Americans has mushroomed and developed at a breakneck pace, as the gold centerpiece that represents The American Dream…. Yet it is property tax breaks, and property tax relief for the middle class in the state of California – that has kept that dream alive.

Transferring A Parent’s Property Tax Rate & Prop 58 Loans

Transferring A Parent's Property Tax Rate & Prop 58 Loans

Transferring A Parent’s Property Tax Rate & Prop 58 Loans

This “parent to child exemption” has saved so many  beneficiaries, homeowners and commercial property owners, thousands  of dollars;  making it possible to put a few dollars away in the bank every year, with the ability to avoid property tax assessment… and transfer parents property taxes at a reasonably low base rate — having the right to keep parents property taxes at the low tax base they were accustomed to paying; i.e., inheriting property taxes that remain low.

Otherwise — very few middle class homeowners could afford to keep an inherited home. They’d have to sell out, given that most of these estate heirs or trust beneficiaries have their own home to maintain and pay taxes on! Or, beneficiaries can still go to a blog or Website that is deeply focused on Proposition 58 and Proposition 13, trust loans and estate property tax reduction like, for example  Property Tax Transfer Trusts.

Or you can conduct research on some other sites focused on Prop 58 and unique, consistently  effective uses of intra-family trusts as  trust loans, generally to buyout property shares owned by co-beneficiaries of the same estate or trust — along with locking in a low property tax base by avoiding CA property tax reassessment at current, typically  high market values, such as https://cloanc.com/tag/california-prop-58

Exactly why many of us think other states, particularly expensive  states, should be looking into property tax relief for all property tax transfer scenarios, involving property tax breaks like the parent to child transfer of inherited property, similar to tax breaks avoiding CA property tax reassessment at current market value. 

Realistic examples of high-tax states that desperately need property tax relief are, for example, states like Massachusetts, or New York, Texas, or Pennsylvania… States like this should all have a property tax exclusion or exemption to protect middle class homeowners  from property tax evaluation at current market rates… giving residential and commercial property owners the right to avoid property tax reassessment every year.  Establishing lower property taxes for all property owners, including landlords; which would  affect  apt. building and commercial store rentals all across any major state… thereby impacting the finances of middle class residents and commercial property owners in an extremely positive fashion.

The surprising reality in California is the fact that so many homeowners do not understand property tax transfer, nor do they understand the use of trust loans and trust lenders, when inheriting a property you want to keep, and need a trust loan to pay off beneficiaries who had insisted on selling their shares in the inherited property, to equalize cash for them in the process, so they don’t need to sell, often below fair value, to a third party.

People that do not understand any of this need to do a little research, on info blogs like this one; or on Websites that delve into Proposition 58, and how property tax transfers and trust loans work, such as the  Trust and Estate Loans Website… or at one of the transaction oriented sites like Commercial Loan Corp  This gives nervous  beneficiaries a great deal of accurate information to help them avoid estate conflicts with co-beneficiaries… typically siblings.  So for once, the inheritance and estate process becomes a win-win experience for all concerned! If you need assistance with a Trust or Estate Loan, you can reach Commercial Loan Corporation at 877-464-1066. They can assist you with the process and answer any questions you might have on the topic of Parent to Child Exclusion from Reassessment and transferring the property taxes from a parent to a child when a trust is involved. 

Inherit A Home And Keep The Property Tax Base

Inherit Property and The Property Tax base

Inherit Property and The Property Tax base

The Los Angeles Times, in their inimitable fashion, put it like this on Oct. 19, 2020:   

About 650,000 California homeowners over the last decade received a tax break that allows them to maintain their parents’ low property tax payments when they inherit their homes…

The provision has since been dubbed “the Lebowski loophole” after The Times found that “The Big Lebowski” actor Jeff Bridges and his siblings had advertised a beachfront home in Malibu inherited from their parents for nearly $16,000 a month in rent despite an annual property tax bill that’s a fraction of that amount.

Proposition 19 would eliminate this property tax break for investment homes and commercial properties, meaning that heirs who inherit their parents’ properties would pay taxes based on market value. With some limitations, children who move into homes inherited from their parents would be able to retain the tax break.

Interesting how the Times gives credence to deceptive wording, while confusing the so-called benefits of Proposition 19.  They parse the actual Prop 19 rules and regs, and purpose in fact…twisting the facts to read, “Proposition 19 would eliminate this property tax break for investment homes and commercial properties…”  Prop 19 does not now exist to eliminate investment homes and commercial properties.  It exists to eliminate the parent to child exclusion, or parent to child exemption… unless you change your life  and move into a new inherited home within a year. 

Interesting that The Times chooses to leave out the fact that inherited property  will be sold off at a loss by inheritors who may not be able to move into inherited property within a year… because middle class homeowners, 95% of the folks affected by this new tax law, won’t be able to afford the new property taxes without the parent to child exemption being utilized within that year one after mom or dad dies.

Instead of telling it like it is The Times tells us, “With some limitations, children who move into homes inherited from their parents would be able to retain the tax break.”  Sure, “some limitations” meaning those folks inheriting property must uproot themselves and set up a  new life within 12 months, plus sell the home they are living in, or give up their inherited home at a financial loss. And maybe they can’t just up and leave their current residence, sell it, and move to a new home that was owned by their parents, that perhaps does not suit them and their family. For a number of reasons. 

Proposition 19 doesn’t exist to eliminate greedy real estate investors… It exists to push middle class home owners out of the way, to force them to sell inherited property if they can’t uproot themselves and move into their inherited home within a year while figuring out a way to sell their own home. In a market hampered by Covid, where maybe it’s not so easy to sell that home they’ve been living in.  These are not investment sharks and real estate hustlers, as the Los Angeles Times is falsely hinting at.  These are regular middle class home owners.

This new tax law affecting property tax relief in California was put in place to generate more money for realtors and the CA Legislature.  Directly impacting consumers.  Regular folks, like you and I.  Not to eliminate “property tax breaks for investment homes and commercial properties”.   That is, we’re sorry to say,  a false characterization.

Abruptly, the entire state found out at the last moment, prior to the November vote, that C.A.R. had launched Proposition 19, along with the California Legislature, which passed by a few votes; due mainly to an extremely clever, albeit a bit deceptive, marketing campaign – confusing voters while hiding the fact that Prop 19 exists to kill parent to child exclusion benefits, bit by deceptive bit.  Don’t be fooled, completely unraveling the parent-to-child exemption is their eventual goal.  Not giving residential and commercial property owners the ability to avoid property tax reassessment every year.

This type of tax break frees property owners from chronic stress based on unpredictable property taxation that is typically high for middle class incomes. This form of property tax relief makes life in general more secure and more affordable for middle class and even upper middle class residents. Rich folks we don’t really need to worry about. They’ll be fine either way. This type of tax relief allows beneficiaries to keep parents property taxes, and of course gives them the ability to transfer parents property taxes when inheriting property; avoiding property tax reassessment, keeping their tax base low through CA Proposition 13.

What is truly incredible to many of us is the ability for a beneficiary in California to use Proposition 58 to get a special loan providing cash to co-beneficiaries through an irrevocable trust, for middle class beneficiaries who want to smooth out cash obstacles (often referred to as “equalizing liquidation”) when it comes to conflicts between siblings who want to sell property versus family members who prefer to keep inherited real property… an invaluable property tax benefit.  Which is exactly why it’s so important to understand how and why Prop 19 exists to kill parent to child exclusion benefits at some point in the future… This is the C.A.R. and CA Legislature’s first baby step in that direction.

All states, forever grappling with this Covid crisis, should be heading towards tax breaks for regular middle class people, and not wasting the country’s time with absurd tax law benefiting a few wealthy corporations, a couple of hundred billionaires and multi-millionaires, with huge tax cuts they do not really need; and corporate welfare for immense companies that would be just fine without it. While a couple of hundred million Americans struggle by generally without tax breaks or tax loopholes of any kind to help them put away some extra cash in the bank every year.

In fact, all states need a Proposition 13 and Proposition 58, to help middle class families get by every year. That’s why beneficiaries or heirs in every state who are expecting real property, or are leaving real property to their own heirs, should conduct some careful research on blogs and Websites that focus on inheritance matters, to get more familiar with Proposition 58 and trust loans, on beneficiary issues and CA Proposition 13.  They should study informative niche blogs like this one…  as well as other niche  Websites that cover property taxes in depth… that delve into California Proposition 13, 58 and 193, as well as how trust loans can help beneficiaries.

All resident should learn more about why Prop 19 exists to kill parent to child exclusion benefits, bit by bit; how to keep parents property taxes and how to transfer parents property taxes, inheriting property taxes, or property tax transfer, parent to child transfer and parent to child exclusion – for residential properties of course; however, also for business oriented sites and commercial properties… that take full advantage of Proposition 58 — making use of trust loans to buyout inherited property from siblings, such as simply to get the facts straight on the transfer of property between siblings, how to buy out siblings share of a house; what makes sibling to sibling property transfer work; and how loans to irrevocable trusts help co-beneficiaries get cash while avoiding the necessity to sell their share of the inherited property.

Then, once they get your pitch together, folks in all states can tell their congressional representatives to get moving on passing property tax law for middle class home owners, not just rich folks that live in lovely upscale neighborhoods!

Many of us wonder when it got to this point in this country, when virtually the only way you can have a genuinely comfortable, safe, secure life is if you are fabulously wealthy – and nothing below that or in between.

PART TWO: Property Tax Relief Fights for Its’ Life in California…

A couple of things worth mentioning, as we’re on the subject of replacing political noise with fact-based information…

The Coronavirus driven mortgage  foreclosure and credit card default catastrophes are coming, given the tens of millions of people that are unemployed nationally… with millions unemployed in California alone.  Let’s not forget that. And the CA Legislature wants to raise property taxes in the middle of a pandemic?

Making matters even scarier for people, there is talk about  eliminating the payroll tax,  unraveling Medicare, and Social Security so those programs are defunded by 2023.  Not a particularly good idea in the midst of a Covid-19 pandemic, where we saw 84,000 people infected in one day last week.  Does California really need a tax hike on property, in a time like this?

We’d have to say no. We don’t need a Proposition 19 to unravel crucial elements making up the foundation of property tax relief in California… And we don’t need a Proposition 15 to take away much needed tax breaks for already struggling landlords and commercial property owners in the state of California. Frankly, we also do not need politicians politicizing the Coronavirus crisis, and we don’t need PR and disinformation from the federal government. 

What we do need, however, are some ways to help home owners, and renters, spend less while unemployment rages – and afterward as well. We need a permanent property tax relief system in place in the United States, just like they have in California, to genuinely help Americans spend less and save more. Making sure, for example, that we have the ability to transfer parents property taxes, when inheriting property taxes, so we can avoid property tax reassessment. Without present value tax assessment taking a large bite out of our savings every year. 

And of course on top of parent to child transfer protections, we need, just like Californians have – the legal right to transfer parents property taxes when inheriting property taxes; with the ability to keep parents property taxes, in other words property tax transfer that maintains everyone’s property taxes at a predictable low base level, say 2% no more, with iron clad parent to child transfer of low property tax rates when we inherit property from our parents or parent – or, as attorneys call it, “parent to child exemption”.  Exclusion from present day property tax evaluation… avoiding property tax reassessment.  As they do in California.

Also, with the ability to buyout siblings’ property shares with a trust loan, through Proposition 58, always insuring we keep our parents low property tax rate; avoiding property tax reassessment. Also, being able to buyout sibling’s share of an inherited house – as realtors call it, “transfer of property between siblings” or “sibling to sibling property transfer”.  

Californians take these property tax relief measures for granted! Buying my brother’s share of our house or the transfer of property between siblings; Buying out siblings’ share of a house; Buying out property shares through cash to a trust loan from a trust lender, such as Commercial Loan Corp, for example. Imagine that. Meanwhile,.

Most Americans don’t even know what these terms even mean, or what Proposition 13 or Proposition 58, or trust loans, even signify. Just do some initial research on sites like https://cloanc.com/category/prop-58 to learn up on trust loans with Proposition 58 or Prop 193 – keeping a low tax base upon 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.

Just take a careful, thoughtful  look at CA State Board of Equalization, at https://www.boe.ca.gov/ or do some easy research on info blogs like https://propertytaxtransfertrusts.com simply to get the basics down, so you know what you’re talking about when you talk to snooty staffers answering calls at your representative’s office in Washington DC.

>> Click Here to go to Part Three…

PART ONE: Property Tax Relief Fights for Its’ Life in California…

Jon Coupal, articulate and persistent president of the authoritative and well respected “Howard Jarvis Taxpayer’s Association”, has been leading the charge in California to keep property tax relief safely in place.

There are a few other notable property tax reduction leaders, like Michael Wyatt, “Property Tax Consultant”; and Kerry Smith, courageous and visionary president of the “Commercial Loan Corp”, that furnishes trust loans tied into Proposition 58, making the transfer of property between siblings and buying out a sibling’s share of a house possible.

All of this, of course, ties into the process of inheriting property taxes, ones ability to keep parents property taxes, and property tax transfer as it pertains to the parent to child transfer (which Proposition 19 seeks to unravel) — commonly known as parent to child exclusion or a parent to child exemption.  Plus, there are high end tax reduction specialists, like noted Paramount Property Tax Appeal president Wes Nichols,  who  specialize in personal business tax reduction and property tax assessor appeals.  These folks have all been on the front lines of these issues for many years.

Not known for soft ball opinions, or for taking it easy on property tax relief opponents, Mr. Coupal was extremely candid in an interview with this Blog; and had some interesting things to say recently, in a particularly hard-hitting article in The Tahoe Daily Tribune, on Oct. 9, 2020 “Explaining the Confusing Prop 19 to Californians” and in his own column on the http://www.hjta.org Website, “Prop-15 Backers Try to Mislead Homeowners”  where Mr. Coupal stated, on Oct 21:

“Prop-15 backers try to mislead homeowners. It’s a sign of desperation. When anyone in politics starts making wild claims less than a month before an election, you know something is amiss. So it is with the proponents of Proposition 15, the “split roll” initiative which would impose the largest property tax increase in California history.

Throughout this campaign, proponents have consistently argued that the measure won’t impact homeowners because it just raises property taxes on commercial and industrial properties. But now, they claim that Prop. 15 actually saves homeowners money.

This is absurd on its face. Recent polling suggests that support for split roll is sinking fast, especially among homeowners. This might explain why proponents have, at the 11th hour, countered with the argument that, as corporations have to pay more, the tax burden for homeowners goes down. Nobody believes this.”

Mr. Coupal also brings to our attention the deliberate confusion around proposed Proposition 19; as he reiterates,

“It’s no secret that ballot initiatives can be confusing, but Proposition 19 takes obfuscation to a whole new level. Voters can’t be blamed if they can’t remember whether Prop. 19 is the initiative that is a massive property tax hike or the measure that actually has something good for homeowners or the initiative that has something to do with firefighting. The fact is, all three are at least somewhat true — especially the part about the big tax increase.

Let’s clear up the confusion: Proposition 13, passed in 1978, gave California homeowners certainty about their future property tax liability because increases in the “taxable value” of property would be limited to 2 percent per year. Property would be reassessed to market value only when it changed hands. But that tax hike even applied when property owners transferred a property to their own children.

Prop. 19 would repeal Proposition 58 and force the reassessment of inherited or transferred property within families. The only exception is if the property is used as the principal residence of the person to whom it was transferred and even that exclusion is capped…”

If you repeal Proposition 58, the uniquely Californian funding process involving trust loans tied into Proposition 58 may have to be revised. And by the way, the ‘principal residence’ ruling must take place within one year of the passing of the decedent who left behind the property in question.  This in itself creates a myriad of problems, if you have an additional mortgage thrust upon you, plus the expenses that very well may accompany  another residence if you’re also a homeowner at the time you inherit this additional property. 

You may have a large family that won’t fit into the inherited property, noo that you’re forced to move in within a year.  The inherited home may be a much longer drive from your job or your spouses’ job.  Your children may attend a school in a totally different district, causing additional problems; etc. so on and so forth.  Otherwise, you may be forced to sell your inherited property, and that can bring inconvenient and expensive issues along with it as well.  It may not be so simple.

At any rate, Mr. Coupal added, “The non-partisan Legislative Analyst’s Office estimates that the repeal of the “inter-generational transfer protections” will result in tens of thousands of California families getting hit with higher property taxes every year. The LAO acknowledges that Prop. 19 imposes an additional tax burden in the “hundreds of millions of dollars”.

>> Click Here to go to Part Two…