Non Pro-Rata Distributions to Avoid the Property Tax Reassessment Event

Non Pro-Rata Distributions to Avoid the Property Tax Reassessment Event

In my business of arranging loans to trusts and estates, I often make loans in order to eliminate the Property Tax Reassessment Event when the transfer of real property is between parents and children or grandparents and grandchildren.

A common strategy to prevent a property tax reassessment event, and the resultant higher property tax, is for a third-party lender to loan money directly to a trust or estate prior to distribution, thus placing debt on the property to adjust the value of assets being distributed to beneficiaries. The per-year savings can be enormous.

After the  loan transaction is complete, the next step is distribution (recording the Trust Transfer Deed to the children beneficiaries); and, filing the Preliminary Change of Ownership Report (“PCOR”) along with a Claim for Reassessment Exclusion (either the Proposition 58 form or the Proposition 193 form).

Here are a few practical tips:

  • Be sure the PCOR and Prop 58 or Prop 193 forms are filed concurrently with the recording of the Trust Transfer Deed.
  • On the PCOR:
    • The SELLER/TRANSFEROR is always the fiduciary of the entity (e.g., “Donald Duck, Successor Trustee of the Mickey Mouse Family Trust”); always include the fidicuiary’s title.
    • BUYER/TRANSFEREE is the child beneficiary.
    • Part 1-J must be checked YES, indicating a transfer to children or grandchildren.
    • Part II-B: The Type of Transfer is Inheritance and include the Date of Death.
  • On the Claim for Reassessment Exclusion,
    • Section B-1 and signature lines: The TRANSFEROR(S)/SELLER(S) is always the fiduciary of the entity (e.g., “Donald Duck, Successor Trustee of the Mickey Mouse Family Trust”); always include the fidicuiary’s title.
    • Section B-2; use the Trust Tax ID, if available.
    • Section B-3; use PARENT OR GRANDPARENT

 

About The Author

Jonathan Brooks
Jonathan Brooks, President of First Probate Loans Jonathan maintains highly specialized expertise in California real property, finance/lending, and trust and estate laws. He has completed nearly 10,000 financial transactions to estates and trusts in more than 25 years of probate loan management work. Jonathan is a trusted source for attorneys throughout California, as well as for mediation and arbitration judges. A recognized industry expert, he serves as a single source for estate mortgage borrowing needs. California Bureau of Real Estate Broker # 01881423 Nationwide Mortgage Licensing System and Registry NMLS # 307111 Paralegal

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