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

13 Comments

  • Danie Matthews on July 27, 2017

    Your practical tips really are helpful for someone who is unfamiliar with the process.

  • Amanda Lacey on July 27, 2017

    Does this work with Llc’s and irrevocable trust?

  • Amanda Johnston on July 28, 2017

    This article is so helpful and can be clear to anyone interested in the information!

  • Bianca Simpson on July 28, 2017

    Great tips! How long does this process take? What are the costs involved? Also, are there third-party lenders that you would recommend?

  • Natalie Schobert on July 28, 2017

    How interesting! What are the third-party lenders that you would recommend?

  • Georgia Grant on July 29, 2017

    Perfect! I was wondering how to keep my property tax from going up! This helps me out a ton

  • Riley Ellis on September 26, 2017

    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!

  • Christine Parawan on September 26, 2017

    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.

  • Christine on September 27, 2017

    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?

  • Shi on September 27, 2017

    What is the Claim for Reassessment Exclusion and what does it do?

  • Charly Neel on September 30, 2017

    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?

  • Linyao Li on October 6, 2017

    Very helpful! I’m so glad I found this article

  • Mabel Smith on October 14, 2017

    Where can one go to get the paperwork to fill this out?

Leave a Reply

Encino Law Center
15915 Ventura Blvd.
Suite 203
Encino, CA 91436

How Can We Help? Contact Us Today

Send us an email via the form below, or call our office directly. We look forward to assisting you with your Probate and Trust Loan needs.






0 Shares
Share
Tweet
+1
Share
Pin