Don’t Forget Property Tax Issues When Planning Your Estate

As a property owner or investor, you know the drill: the tax assessor establishes the value of any property you own at the time of purchase and you are responsible for the taxes based on that assessment. Your property tax rate may go up annually – but not by more than 2% a year thanks to Proposition 13.

But what happens when you pass your property on as part of an estate plan?

For most people, estate planning is a part of being financially responsible. Transferring real estate assets into a trust or changing ownership of a property within a family prior to death is a good financial move. Working to minimize inheritance taxes and provide for the transfer of wealth simply makes sense. Unfortunately, these title transfers can trigger a property tax reassessment that results in significantly higher tax rates.

That’s why estate planning should include attention to both inheritance taxes and real estate tax issues – including potential property tax reassessments. Working with an attorney who knows these issues can guide you through the legal pathways to reducing or eliminating increased property taxes in the estate planning process. Proper planning can reduce or remove property tax issues for generations, especially when more than one legal exclusion is applied.

The attorneys at Kevin J. Moore & Associates use their deep knowledge of the ever-changing tax laws to guide clients through the real estate issues inherent in the estate planning process. Depending on your particular situation, you may find protection in the Parent-Child Exclusion which allows for transfers of property between parents and children with no reassessment or one of many other solutions.

For example, properly structuring a transfer of assets to a living trust or changing the form of ownership of a property should legally exempt the property in question from a reassessment. But, that doesn’t mean the activity won’t trigger interest from the assessor’s office. Often the assessor will request proof of proper documentation to assure that the transfers have been appropriately arranged so that they meet the criteria for tax assessment exclusion.

Though it may be tempting for property owners to respond directly to the tax assessor’s office, the specificity of the law can be tricky. Simply providing the wrong documents or having incomplete answers to questions about how exclusion legally applies can have expensive results. It’s not uncommon for incomplete or inaccurate responses to trigger a full property tax reassessment. That reassessment can mean thousands of dollars in increased taxes or a legal bill to appeal the assessment.

A more efficient approach is to engage a legal expert as soon as you get a request for documentation. Because they know the law and are familiar with these situations, they can usually resolve any issues, provide the proper documentation and verification to avoid complications and expenses.

If, however, you do find yourself in a situation in which your estate planning process has resulted in a full property tax reassessment, appealing the decision may be in order. An administrative hearing before the Assessment Appeals Board can often resolve any issues before they go to Superior Court.

Again, legal representation can make all the difference in a quick efficient resolution.

Estate planning is the best way to make sure your assets are distributed as you wish, your heirs are protected from undue tax burdens and your memory is preserved. Just make sure to include property tax and assessment issues in the process. The attorneys at Kevin J. Moore & Associates are here to provide consultation at any stage of the process from the first planning conversation to structuring real estate transfers to responding to assessor inquiries and filing appeals – just give us a call or send along an email inquiry.

Please call: (626) 568-9300

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Kevin Moore, Founder of Kevin J. Moore & Associates, is focused in the areas of estate planning, trusts and probate services with additional expertise in both domestic and international business transactions and tax planning and tax controversy representation for individuals and companies.