Inheriting Property While Keeping a Low Property Tax Base

Written by Posted On Wednesday, 19 May 2021 20:39

2020–2021 Slowest Growth Rate in California’s History, While Real Estate Values Soar

As average sale prices of single-family homes in California approaches $800,000 the state’s  population fell by more than 182,000 people, to less than 39.5 million people in 2020; signaling the first year America’s most populated state experienced such a slow growth rate, abc7.com tells us. As experts and analysts  continue to debate the reasons why… (1)     

Economic Conditions in California Call for Property Tax Relief, Not Tax Hikes 

In May, 2021 Adam Beam from ABCnews.go.com & Associated Press told us, “In recent years, more people have left California for other states than have moved there, a trend Republicans say is a result of the state's high taxes and over-prices real estate. The average sale price of a single-family home in California hit a record $758,990 in March, a 23.9% increase from a year ago.” (2)  

Ben Christopher  at CalMatters.com  declared on May 7, 2021 that  “The number of Californians declined in 2020 for the first year since at least 1900.  The COVID-19 pandemic has done what more than a century of past plagues, recessions, crime waves, droughts and earthquakes couldn’t.  It shrank California’s population.” (3)

 “The numbers don't lie. People are leaving our state because it's not affordable to live here…” tweeted Mr. Kevin Faulconer, former mayor of San Diego.  Without knowing it, they are all correct.   (4)

Property Tax Specialists in California Are Trying to Make a Difference – to Help Residents 

To help middle class families that have been impacted by these problems, several financial services companies have been focusing on lowering property taxes for new homeowners and beneficiaries of trusts and estates – such as Michael Wyatt Consulting in Corona and the leaders of the trust lending industry, Commercial Loan Corporation in Newport Beach, who is offering a free consultation to residents on keeping a low property tax base on an inherited home.  

Trust lenders help families get approved to work with tax measure Proposition 58 and 19. They originate loans to estates and irrevocable trusts; allowing beneficiaries to buyout inherited property from co-beneficiaries; and equalizing distribution of funds to beneficiaries who are selling. 

Working With CA Proposition 58     

CA Proposition 58 was approved by voters on Nov. 6, 1986, as a constitutional amendment; excluding from reassessment transfers of real property between parents and their children – providing a loan directly to a trust, thereby avoiding any risk of triggering property tax reassessment.  Loan proceeds are then used to pay off beneficiaries who are selling their real estate assets in line with a parent-child transfer, or “parent-child exclusion”.   

Oddly enough, funding through a trust helps co-beneficiaries receive more cash than they are likely to receive from a buyer directly.  The title of the property can then be transferred from the name of the trust into the name of the beneficiary who is retaining inherited property.

Utilizing Prop 58, Prop 19 & Trust Loans to Resolve Cash Flow and Family Property Conflicts 

Property tax relief oriented firms in California are now working more closely with families inheriting property, alongside their attorney, or family accountant – assisting co-beneficiaries to avoid property tax reassessment at current market rates; plus resolving conflicts over keeping or selling inherited property; determining through a free consultation how much a family can expect to save in property taxes.  

A loan to an irrevocable trust allows beneficiaries to keep an inherited home with their parent’s low Prop 13 tax base, while beneficiaries who prefer to sell receive an equal portion of cash.  By avoiding expensive realtor fees, beneficiaries on average receive an additional $15,000; and  those keeping inherited property save an average of  $6,200 per year in property taxes. (5)   

CA Property Tax Specialists Clarify Their Process 

Tanis Alonso, Sr. account manager at Commercial Loan Corp, discussed trust loan solutions in a 2021 interview – with respect to selling an inherited home versus keeping it.  She said:  

“We don’t view each trust loan as simply a ‘financial transaction.’ Nor do we see the home they’ve lived in for decades as just a ‘piece of real estate’. To us, this a ‘piece of family history’ in the making. And the process a ‘family decision,’ not a ‘transaction’. We see our clients as real families we’re assisting, financially and emotionally, not just as clients signing a contract for a trust loan. We enjoy helping people… getting them money when they really need it – saving them on the cost side in the bargain, with a trust loan.”

Ms. Alonso also elaborates on the firm’s process: “Besides lowering property taxes the key issue for families is selling as opposed to keeping inherited property. By someone keeping the family property, everyone receives more money than if they were to sell the property to an outside buyer.    Because with a loan to a trust there is the upside of less expense. We’re talking about ten times less of an expense than would normally be involved in a house sale. Again, a process compensating beneficiaries through a trust loan, instead of a house sale or coming up with the cash yourself… versus a formal house sale through a realtor that would cost ten times the amount to process the entire scenario, a house sale, with realtor commission and fees, taxes, ancillary costs, etc… ” (6)

Trust Lenders and the CA Parent-Child Exclusion (or Exemption)

Property tax consultant Michael Wyatt formed Michael Wyatt Consulting 25 years ago to help advisors and their clients avoid inadvertent tax consequences, to achieve success and achieve their goals.  Mr. Wyatt told us in a recent interview: 

“By and large, trust lender terms can be a lot more flexible than an institutional lender like Wells Fargo or Bank of America if they are self funded, which few are. They can extend easier terms to clients. Commercial Loan Corp is one of the few self-funded trust lenders with parent-child exclusion expertise, which is why I deal only with them.

Compliance for commercial and residential property owners is far less strict with them, due to their being self funded.  They don’t charge any fees up-front, another great benefit.  Plus, they don’t require paying loan interest in advance.  Most trust lenders do.  There is never a “due-on-sale” clause… that requires the mortgage to be repaid in full when sold; or that all or some of the interest owed must be paid up-front to secure the mortgage.  No “alienation clause” during property transfer, stating that the borrower has to pay back the mortgage in full before transferring property to another person. It’s fast, 5 to 7 days; and all costs are offset.  It makes more sense for new homeowners, and beneficiaries, to take this trust loan approach … when inheriting property from parents.” (7)

Families, beneficiaries, or their attorneys, who want to take advantage of California Proposition 58 or 19, and require a trust loan, can contact Commercial Loan Corporation at 1-877-464-1066.  

PropertyTaxNews.org is a blog written by communications specialist Geoffrey Sadwith, sponsored by Commercial Loan Corp – devoted to promoting California property tax relief; and maintaining a low property tax base for inherited homes. 

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