Property Tax Reassessment Strategies

Property Tax Reassessment Strategies

Professional fiduciaries can save a family an immense amount of money through careful estate planning. 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.

Many family homes in the 1960s or 1970s were purchased for $50,000 or less. These homes are now valued at 10-30 times the original purchase price. If the current property tax is $500-$1,000 per year, the reassessed property tax could be $5,000 to $30,000 – or higher. Per-year savings is enormous.

From California Trust and Estates Quarterly, Volume 12, Issue 4 – Winter 2007, on the subject:

“The State Board of Equalization has taken the position that where the value of the real property being distributed exceeds the beneficiary’s share of the trust . . ., the fiduciary making the distribution may avoid reassessment by placing debt on the property to adjust the value of the assets distributed to the various beneficiaries. The preferred method of encumbering the property is to have the trustee obtain a loan from a third-party lender.”

If, after distribution, one beneficiary buys out another, then the transfer will trigger a reassessment event. The alternative is for a third-party lender to loan directly to the professional fiduciary, pursuant to Revenue and Taxation Code Section 63.1.

I have a great deal of experience in working with Professional Fiduciaries and their attorneys, effectuating these property tax reassessment strategy loans. Please contact me with questions or for more information.

 

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

7 Comments

  • Amanda Lacey on September 26, 2017

    Wow! Why are older homes valued at that much more? I would think the value would drop

  • Charly Neel on September 26, 2017

    So a tax reassessment may never be required, even if the estate dramatically increases in value, as long as you use a third-party lender?

  • Riley Ellis on September 29, 2017

    Interesting to know! Why would placing debt on the property affect its taxes?

  • Christine on October 3, 2017

    Would like to know more why we need a third-party lender to help people to loan money “directly to a trust or estate prior to distribution” and reasons behind it?

  • Linda Mott on October 9, 2017

    After reading your articles, I really think I would get help from a professional in the future to deal with these problems. This really is not my expertise lol

  • Mabel Smith on October 14, 2017

    This is great to know. Have the right kind of help during tax season can make all of the difference

    • Jonathan Brooks on November 20, 2017

      I always recommend using a licensed attorney for counsel on these complex property tax rules.

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