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 (the Proposition 19).
Here are a few practical tips:
- Be sure the PCOR and Prop 19 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 fiduciary’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
Your practical tips really are helpful for someone who is unfamiliar with the process.
Does this work with Llc’s and irrevocable trust?
This article is so helpful and can be clear to anyone interested in the information!
Great tips! How long does this process take? What are the costs involved? Also, are there third-party lenders that you would recommend?
How interesting! What are the third-party lenders that you would recommend?
Perfect! I was wondering how to keep my property tax from going up! This helps me out a ton
As someone who is knew to this process and just learning how to deal with these papers, I found this article incredibly helpful! Thank you for sharing!
I find this article very helpful to know when transferring real property to family members and those related to you! It saves the burden for the family member to know that they don’t have to worry about paying too much for the property and knowing it is in good hands.
What if the children or grandchildren are not blood related to the parents or grandparents and were for example adopted by the Seller/Transferor? Is it possible to transfer your property and/or trusts to those not blood related to you and if so what is the process?
What is the Claim for Reassessment Exclusion and what does it do?
Is it always assumed that by the time a parent or grandparent transfers their property to a child/grandchild, the property tax on it has increased?
Very helpful! I’m so glad I found this article
Where can one go to get the paperwork to fill this out?