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