Property transfer & taxes

Member since 2020 · 42 posts · 22 votes

I have a question about a property transfer and taxes. To sum it up: What I’m trying to accomplish is to gain ownership of a home without resetting the property taxes to their current value.

The story: My Grandparents (the trustor) made a trust and included their 4 sons as the beneficiaries of the trust. My Father (one of the 4) passed away years ago without any changes made to the trust. I inherited his share. I agreed with my Uncles that I’d be able to purchase the home from them once my grandparents passed away, which they now have. I’ll happily pay my uncles their share of the inheritance in exchange for the home at a fair price that we will agree upon. They are all pretty agreeable and want me to have the home, so no real family drama. As long as they get paid (which they will) I think they are open to all ideas in and out of the box.

The property taxes are set based on a 1950’s rate and if they reset, I’ll have to pay thousands more for every year that I own the home. I’d rather not keep the property in the trust as I imagine it would be hard if not impossible to borrow money from the home while it would be in my deceased grandparent’s names. Same for asking my uncles for their signatures on paperwork for any future changes to the property for permitted work, insurance claims, etc.

For any real estate investors, lawyers, title officers, or anybody else…Is there a way to transfer property while not triggering a tax rate increase? Any other tips/ideas?

The details:

Located in California, Los Angeles county.

Held in a trust

The home is the only real asset in the trust.

Small mortgage, about $50,000 owed.

No other liens.

I looked into this previously. So with Prop 19, California made it very easy to trigger the reassessment. From my understanding you can move into the property to prevent reassessment but once you move out, it will get triggered again. They call this the parent-child (intergenerational) transfer exclusion. I put a link to prop 19 information below.

https://www.boe.ca.gov/prop19/...

1 Reply

Katie Balatbat

CPA and Attorney · San Diego, attorney · Member since 2022 · 302 posts · 219 votes

3y

@Daniel Bither

If the only asset in the trust is the home, it would likely be very difficult to not trigger a reassessment for property taxes. It might be possible with the correct type of loan to the trust, but would likely increase legal fees and other costs that your uncles may not be willing to go that route. When did your grandparents die? Was the property their primary residence? Will it be your primary residence? You'll want to research some key terms called the grandparent-grandchild exclusion and Prop 19, as Miriam mentioned above. Probably a long shot that it could work.

*this post does not create an attorney-client or CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

2 Reply

Daniel Bither

OP

Tujunga, CA · Member since 2016 · 3 posts · 0 votes

3y

@Miriam Velazquez

Thanks for the info. It seems like since I am a grandchild and not a child most of what the q&a’s do not apply to me. We currently live in the home. Were you successful in not triggering a re-assessment? If so, how?

0 Reply

Daniel Bither

OP

Tujunga, CA · Member since 2016 · 3 posts · 0 votes

3y

@Katie Balatbat

A long shot sounds about right based on what I’m finding out.

Tell me more about the loan to the trust. How have you structured that in the past? What would be the legal fees? I’m willing to take on some one tome fees since we plan on owning it long term knowing the savings from the taxes will make up for it. I just don’t want to put my uncles through too much to get this done. Like I said, they will work with me a little.

1 Grandparent passed in 2013 and the other this month. It was their primary. We live in the home.

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Miriam Velazquez

Member since 2020 · 42 posts · 22 votes

3y

Quote from @Daniel Bither:

@Miriam Velazquez

Thanks for the info. It seems like since I am a grandchild and not a child most of what the q&a’s do not apply to me. We currently live in the home. Were you successful in not triggering a re-assessment? If so, how?

I would continue looking into it because they also have the grandparent-grandchild exclusion. There’s a phone number listed on that website 1-916-274-3350 so you can ask more questions. So I was researching for my mother in law who is still living. She wanted to figure out if there was a way around it. I couldn’t figure out anything with the prop 19. Even if we added my husbands name to the property while she was living, it would trigger a reassessment for his half of the property or the entirety if we remove her name from the title. From what I read the only option is to move in after her passing which we will revisit when the time comes. Luckily her house is paid off so I think we can afford to pay the taxes if need be. Let me know if you find out anything else. I was looking into this about a year ago and the rules weren’t ironed out and I couldn’t get much information. Seems there’s more information now.

0 Reply

Katie Balatbat

CPA and Attorney · San Diego, attorney · Member since 2022 · 302 posts · 219 votes

3y

Quote from @Daniel Bither:

@Katie Balatbat

A long shot sounds about right based on what I’m finding out.

Tell me more about the loan to the trust. How have you structured that in the past? What would be the legal fees? I’m willing to take on some one tome fees since we plan on owning it long term knowing the savings from the taxes will make up for it. I just don’t want to put my uncles through too much to get this done. Like I said, they will work with me a little.

1 Grandparent passed in 2013 and the other this month. It was their primary. We live in the home.

Daniel, you're getting into a very nuanced area that is highly specialized, and the rules need to be followed to EXACT details to make it worth your while. You have to be careful to not have it viewed as though you purchased your uncles' interests, as well as make sure you are an eligible beneficiary under grandparent-grandchild rules, as well as the new Prop 19 rules. There's a new $1m cap that even if you meet all the qualifications and jump through the hoops, there could be some reassessment depending on how much the property has appreciated compared to its assessed value. If you're curious about the loan process, you could start by looking at a company called Commercial Loan Corporation, who often specializes in loans to irrevocable trusts and is very familiar with the loans in regards to the property tax savings; my recollection is that they have some marketing materials on their website.
*This post does not create an attorney-client or CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

0 Reply

Gina Tse-Louie

Member since 2024 · 39 posts · 2 votes

2y

It depends on how the trust was drafted. A trust may be able to borrow. I know a lender that will. However familial transfers other than parents to children and grandparents to grandchildren are not exempt from reassessment (and further limited by Proposition 19).Assessor will review trusts. Help us to #FiXProp19 by #RepealTheDeathTax. Download, print, wet ink sign and submit. Signer can be Circulator (witness for self and others). Complete BOTH sections. We need 1.3 million signatures to get on November 2024 ballot. Volunteer and Download petition at ForCalifornians.com or RepealTheDeathTax.com.

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