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.