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Ray, Lawyer
Category: Real Estate Law
Satisfied Customers: 41009
Experience:  Texas Attorney for 30 years dealing in real estate
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Here’s the scenario: My parents living trust includes the

Customer Question

Here’s the scenario:
My parents living trust includes the title for their primary home in Santa Ana, CA. The trust entitles their seven children an equal share in the property.
My brother and his family is presently living there and would like to purchase the home from the trust. He would like to take advantage of Proposition 58. We have agreed on a sale price and he has been pre-approved using the First Time Home Buyer Loan Program. Since he is low income, he and his wife will need to add their two daughters to qualify for the loan.
Can he take title, ownership, to the property using Proposition 58 provisions based on what I’ve shared above?
I spoke to the Glenda at the Assessment Service Unit in Sacramento at(###) ###-####earlier today. She shared that my brother was entitled to 1/7 of the property and that we’d have to have the trust take a loan against the property, then my brother would have to take sole possession from the trust to take advantage of Proposition 58. That doesn’t seem to make sense to me, especially when the Orange County website Prop 58 form, Section B allows for additional Transferors/Sellers and Section C allows for additional Transferees/Buyers to be listed.
My original call was to ascertain if we needed to fill out form for both Proposition 58 and 193 or if 58 would supersede, since granddaughters would also be on the title.
Please share your thoughts regarding my next steps.
JA: Since estate law varies from place to place, can you tell me what state this is in?
Customer: California
JA: Has any paperwork been filed?
Customer: at this point no
JA: Anything else you want the lawyer to know before I connect you?
Customer: I don't believe so
Submitted: 10 months ago.
Category: Real Estate Law
Expert:  Ray replied 10 months ago.

Hi and welcome to JA. Ray here to help you today.Please bear with me a few moments while I review your question, conduct and prepare your response.

Expert:  Ray replied 10 months ago.

Here the clerk is correct that brother has 1/7 interest and that trust would have to take loan against property and then transfer from the trust st they state.This is complicated here by the seven children that are equitable beneficiaries of the trust.

  • The parent-child transfers of Proposition 58 include all types of transfers of title from parents to children or from children to parents. Transfers must occur on or after November 6, 1986, the effective date of the Proposition. They may be in the form of a deed (recorded on or after November 6, 1986) or a court order dated on or after that date.
  • Further, this Proposition includes all types of real property owned by the transferor, including all the value of his/her principal place of residence and on the first one million dollars ($1 million) of the enrolled value of all other types of property. A mother and father can combine their exclusion for a limit of $2 million dollars.

Definitions & Terminology

Children: Children include the following: sons and daughters, sons-in-law and daughters-in-law, stepchildren, and children adopted under 18.

Gift-Purchase: Transfers as a gift or purchase between parents and children are excluded with a completed Prop. 58 form.

Principal Residence: Proposition 58 does not require that the parent or child use the transferred property as his or her principal residence. In addition, the $1 million limit does not apply to the transferor's principal residence.

$1 Million Dollar Exclusion: The $1 million exclusion for other property applies for each transferor. Therefore, a mother can transfer $1 million of other property and a father can transfer $1 million of other property for a total combined exclusion of $2 million.

Legal Entities: Generally, transfers directly between legal entities owned by parents and children are not entitled to the benefits of this measure.

Trusts: A transfer to or from a trust is treated just as a transfer to or from the trustor personally, provided the trust is revocable or the trustor retains the present beneficial use, possession, or enjoyment of the transferred property.

Date of Death of Decedent: The date of any transfer between parents and their children under a will or intestate succession is the date of a decedent's death, provided the decedent died on or after November 6, 1986.

"Third Party" Defined: A third party is any person or entity that is not a transferee or transferor in the transfer between the parents and children.

"Transfer of the Real Property to a "Third Party": For filing proposes, a transfer of the real property to a third party occurs when all the real property received is transferred to someone other than an original transferee or transferor. Therefore, a transfer may qualify for an exclusion when a partial interest in the property received is transferred to a third party prior to an application being filed.

Filing Requirements: Current law requires that the claim be filed within three (3) years after the date of the transfer of real property or prior to the transfer of the real property to a third party, whichever is earlier. However, even if a claim is not made within this filing period, a claim is considered timely if it is filed anytime prior to or within six (6) months after the mailing date of a Notice of Supplemental Assessment or Notice of Proposed Escape Assessment, whichever is later. For example if a taxpayer received a Notice of Supplemental Assessment for a parent-child transfer dated January 1, 1994, and then received a Notice of Proposed Escape Assessment dated April 1, 1994, the taxpayer would have six (6) months from April 1, 1994 to file a claim with the Assessor.

Expert:  Ray replied 10 months ago.

You will need to to county tax assessor and complete the required forms to exempt the transfer here.I would use a trust lawyer to make sure t he loan and transfer/sale avoid any problems with this so that it goes smoothly.

Customer: replied 10 months ago.
We basically you quoted everything that's on the website...not much more than I already know...
Expert:  Ray replied 10 months ago.

Here you have to do this as the clerk stated.You want to avoid the tax penalties.

Here are trust lawyers that can complete this, many have free consult.

Expert:  Ray replied 10 months ago.

So by doing this trust borrows funds and then transfer the property with the loan here to the one sibling.Loan proceeds are used pay off other siblings.Buying sibling has to assume the debt from the trust.It gets around tax hike.Lawyer referral to make this happen and to go over the process.

Expert:  Ray replied 10 months ago.

More information here

You are trying to help the sibling avoid reassessment here and it is tricky.Normally trust sells it and you don't care that buyer is reassessed.

I appreciate the chance to help and follow up here.I wish you good luck with all of this.

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