Bay Area Real Estate

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Carefreeap
Posts: 2102
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Bay Area Real Estate

Post by Carefreeap » Wed Oct 11, 2017 9:45 am

physiorol wrote:
Wed Oct 11, 2017 12:24 am
Carefreeap wrote:
Sat Oct 07, 2017 4:59 pm
physiorol wrote:
Sat Oct 07, 2017 4:20 pm
Carefreeap wrote:
Mon Oct 02, 2017 6:02 pm
physiorol wrote:
Sat Sep 30, 2017 3:14 pm


Briefly, what are the tax/financial consequences/benefits of transferring residential property from parent to child? Do the parents have to die first?
As an example, when my parents divorced they sold their house to my brother. They had bought the house in 1963 and the assessed value was something like $70k when they sold in 1996. Market value was about $325k. Taxes were about $700/yr!
So does the recipient of the house (eg your brother) keep the tax assessment?
He would have had he not lost the property in foreclosure in 2009. :oops:
So passing on the family home in a state like CA (prop 13) could provide a massive financial advantage to offspring.
In theory. It would be interesting to have an analysis done to see how many properties have Prop 13 status from 1975. I'm sure there are a few but I bet turnover is still pretty high. I know very few people who kept the family house.

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Hyperborea
Posts: 375
Joined: Sat Apr 15, 2017 10:31 am
Location: Silicon Valley

Re: Bay Area Real Estate

Post by Hyperborea » Wed Oct 11, 2017 11:09 am

Carefreeap wrote:
Wed Oct 11, 2017 9:45 am
physiorol wrote:
Wed Oct 11, 2017 12:24 am
Carefreeap wrote:
Sat Oct 07, 2017 4:59 pm
physiorol wrote:
Sat Oct 07, 2017 4:20 pm
Carefreeap wrote:
Mon Oct 02, 2017 6:02 pm


As an example, when my parents divorced they sold their house to my brother. They had bought the house in 1963 and the assessed value was something like $70k when they sold in 1996. Market value was about $325k. Taxes were about $700/yr!
So does the recipient of the house (eg your brother) keep the tax assessment?
He would have had he not lost the property in foreclosure in 2009. :oops:
So passing on the family home in a state like CA (prop 13) could provide a massive financial advantage to offspring.
In theory. It would be interesting to have an analysis done to see how many properties have Prop 13 status from 1975. I'm sure there are a few but I bet turnover is still pretty high. I know very few people who kept the family house.
I've benefited from Prop 13 but I'm not sure that over the long run it's beneficial for the community. It does limit the increase in taxes to a level that can be below inflation (2%) and that means that municipal budgets are capped to grow slower than inflation. That then has an impact on the quality of the local roads, schools, and other community resources. While most houses will turn over in 10-20 years, corporations can and do keep property for far longer than that and over time will be the main beneficiary of Prop 13.

I think not forcing people to move because of property tax increases is admirable but I'm not sure that Prop 13 is the best solution. It's only been in force for about 40 years but with the slow decline in some of the infrastructure and the steadily decreasing percent of local property tax paid by business this will have to break at some point.

Carefreeap
Posts: 2102
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Bay Area Real Estate

Post by Carefreeap » Wed Oct 11, 2017 3:01 pm

Hyperborea wrote:
Wed Oct 11, 2017 11:09 am
Carefreeap wrote:
Wed Oct 11, 2017 9:45 am
physiorol wrote:
Wed Oct 11, 2017 12:24 am
Carefreeap wrote:
Sat Oct 07, 2017 4:59 pm
physiorol wrote:
Sat Oct 07, 2017 4:20 pm


So does the recipient of the house (eg your brother) keep the tax assessment?
He would have had he not lost the property in foreclosure in 2009. :oops:
So passing on the family home in a state like CA (prop 13) could provide a massive financial advantage to offspring.
In theory. It would be interesting to have an analysis done to see how many properties have Prop 13 status from 1975. I'm sure there are a few but I bet turnover is still pretty high. I know very few people who kept the family house.
I've benefited from Prop 13 but I'm not sure that over the long run it's beneficial for the community. It does limit the increase in taxes to a level that can be below inflation (2%) and that means that municipal budgets are capped to grow slower than inflation. That then has an impact on the quality of the local roads, schools, and other community resources. While most houses will turn over in 10-20 years, corporations can and do keep property for far longer than that and over time will be the main beneficiary of Prop 13.

I think not forcing people to move because of property tax increases is admirable but I'm not sure that Prop 13 is the best solution. It's only been in force for about 40 years but with the slow decline in some of the infrastructure and the steadily decreasing percent of local property tax paid by business this will have to break at some point.
I don't know; business grow and go out of business, and heirs to them will sell too so there's turnover. And utilities (including the railroads) are not protected under prop 13. Only a survey can really tell you what % of property owners have ultra low inherited tax bases.

CA's infrastructure problems are more complicated than just prop 13. Until recently schools were able to get around prop 13 limits by passing certain kinds of bonds based on a simple majority. During my tenure in my Bay Area town, I don't think a single school bond was ever defeated.

physiorol
Posts: 159
Joined: Sun Mar 09, 2014 1:52 am

Re: Bay Area Real Estate

Post by physiorol » Wed Oct 11, 2017 10:41 pm

Carefreeap wrote:
Wed Oct 11, 2017 3:01 pm
Hyperborea wrote:
Wed Oct 11, 2017 11:09 am
Carefreeap wrote:
Wed Oct 11, 2017 9:45 am
physiorol wrote:
Wed Oct 11, 2017 12:24 am
Carefreeap wrote:
Sat Oct 07, 2017 4:59 pm


He would have had he not lost the property in foreclosure in 2009. :oops:
So passing on the family home in a state like CA (prop 13) could provide a massive financial advantage to offspring.
In theory. It would be interesting to have an analysis done to see how many properties have Prop 13 status from 1975. I'm sure there are a few but I bet turnover is still pretty high. I know very few people who kept the family house.
I've benefited from Prop 13 but I'm not sure that over the long run it's beneficial for the community. It does limit the increase in taxes to a level that can be below inflation (2%) and that means that municipal budgets are capped to grow slower than inflation. That then has an impact on the quality of the local roads, schools, and other community resources. While most houses will turn over in 10-20 years, corporations can and do keep property for far longer than that and over time will be the main beneficiary of Prop 13.

I think not forcing people to move because of property tax increases is admirable but I'm not sure that Prop 13 is the best solution. It's only been in force for about 40 years but with the slow decline in some of the infrastructure and the steadily decreasing percent of local property tax paid by business this will have to break at some point.
I don't know; business grow and go out of business, and heirs to them will sell too so there's turnover. And utilities (including the railroads) are not protected under prop 13. Only a survey can really tell you what % of property owners have ultra low inherited tax bases.

CA's infrastructure problems are more complicated than just prop 13. Until recently schools were able to get around prop 13 limits by passing certain kinds of bonds based on a simple majority. During my tenure in my Bay Area town, I don't think a single school bond was ever defeated.
Does the child receiving property from a parent need to live in the house to keep the low property tax basis or does it work for investment properties too?

Carefreeap
Posts: 2102
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Bay Area Real Estate

Post by Carefreeap » Thu Oct 12, 2017 9:57 am

physiorol wrote:
Wed Oct 11, 2017 10:41 pm
Carefreeap wrote:
Wed Oct 11, 2017 3:01 pm
Hyperborea wrote:
Wed Oct 11, 2017 11:09 am
Carefreeap wrote:
Wed Oct 11, 2017 9:45 am
physiorol wrote:
Wed Oct 11, 2017 12:24 am


So passing on the family home in a state like CA (prop 13) could provide a massive financial advantage to offspring.
In theory. It would be interesting to have an analysis done to see how many properties have Prop 13 status from 1975. I'm sure there are a few but I bet turnover is still pretty high. I know very few people who kept the family house.
I've benefited from Prop 13 but I'm not sure that over the long run it's beneficial for the community. It does limit the increase in taxes to a level that can be below inflation (2%) and that means that municipal budgets are capped to grow slower than inflation. That then has an impact on the quality of the local roads, schools, and other community resources. While most houses will turn over in 10-20 years, corporations can and do keep property for far longer than that and over time will be the main beneficiary of Prop 13.

I think not forcing people to move because of property tax increases is admirable but I'm not sure that Prop 13 is the best solution. It's only been in force for about 40 years but with the slow decline in some of the infrastructure and the steadily decreasing percent of local property tax paid by business this will have to break at some point.
I don't know; business grow and go out of business, and heirs to them will sell too so there's turnover. And utilities (including the railroads) are not protected under prop 13. Only a survey can really tell you what % of property owners have ultra low inherited tax bases.

CA's infrastructure problems are more complicated than just prop 13. Until recently schools were able to get around prop 13 limits by passing certain kinds of bonds based on a simple majority. During my tenure in my Bay Area town, I don't think a single school bond was ever defeated.
Does the child receiving property from a parent need to live in the house to keep the low property tax basis or does it work for investment properties too?
Parent to child, Grandparent to grandchild and Child to parent transfers are exempt from reassessment. There is a $1m limit on non principal transfers. The new property owner doesn't need to owner-occupy the property. However sibling transfers aren't exempt and that's another plus for placing a property into a Living Trust. Although both my brother and I were beneficiaries of my mother's Trust, making the transfer of her condo from her Trust to my Trust was exempt. As executor of her estate I could have done something similar with the little rental property which wasn't titled in her Trust by handing my brother his share of the equity and doing a direct transfer out of her name to me.

Here's a reference site you might find helpful: http://www.ocgov.com/gov/assessor/programs/transfer

In thinking about it further, I would guess that this could be one downside to the recently approved beneficiary deed option. Property going from a parent's name directly to the beneficiaries could trigger some partial reassessments if the siblings wanted to be bought out.

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