Property Tax Reassessment Strategy Loans
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.
This type of loan is in compliance with California Revenue & Taxation Code section 63.1. Should this loan be for the purposes of effecting a non-pro rata distribution of a trust or probate estate in order to preserve one or more heir/beneficiary's eligibility under California Revenue & Taxation Code section 63.1 for an exclusion from reassessment of the subject property. Such manner of distribution for this purpose has been approved by the California State Board of Equalization as well as the local County Assessor.
These types of loans can be up to $1,000,000.00 and for a term as long as 60 months.
A complete description of the process is described in the California Trusts and Estates Quarterly, Volume 12, Issue 4, Winter 2007 Article, authored by Wayne H. Gilber and Timothy S. Galosh, entitled Understanding Property Tax Treatment of Trusts. A copy can be found on our website: firstprobateloans.com