I had a Trustee fire me because he did not like my advice regarding the transfer of his mother’s home to avoid property tax reassessment.
Under Proposition 13 real property in California receives a new base year value and thus a new property tax base when a Change in Ownership occurs. Exemptions apply that preclude reassessment. Transfers between parents and children and interspousal transfers are examples of some of the exemptions available.
The Trustee’s strategy was flawed. He wanted to have the beneficiary of the house perform a cash out refinance and take title through escrow, with the cash going to the other siblings through the close of escrow. Ultimately, this strategy would have been considered a purchase of two siblings' share by the third sibling not a transfer from a parent to a child. Reassessment would be proper under his strategy as to 2/3rds of the house because transfers between siblings are not exempt from reassessment.
Under his set of facts, the State Board of Equalization and Los Angeles County Assessor’s Office require specific steps to be performed to effectuate a transfer that would exempt the transfer from the Change in Ownership Rules.
In firing me, he referenced the fact that his friends recently prepared, executed and recorded a deed by themselves under similar circumstances. Yes, the transfer would occur, but so would reassessment in their similar set of facts after the Assessor scrutinizes the paperwork.
After I was fired I wrote him a “cover my back” letter which included advisory letters from the S.B.O.E. and L.A.C.A. The paperwork was FedExed for Saturday morning delivery.
Shortly thereafter he sought to retain a new attorney. At some point during their initial meeting his new attorney advised him to rehire me and, the icing on the cake, he asked if he could keep my work product for his future reference.
After being fired and rehired, we set up a private loan taken out by the trustee to equalize the shares in this cash poor trust. Following various rules set forth by the government entities we later distributed cash to the two siblings and the house to the third subject to the debt.