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Property Tax Planning Lawyers in Encino

Planning to Minimize Higher Property Taxes for Your Family

In California, property taxes are, in general, based on the purchase price of the property with a small increase each year. Over time, the value of the real estate can increase significantly more than the property tax basis. The result is that when ownership in the property finally changes and the property is reassessed to its current fair market value, the property taxes go up dramatically.

The transfer of real property, as a gift or sale during life, or as inheritance upon death is considered a change of ownership, subject to exceptions described below. Without proper planning, these increased taxes can make it difficult for your beneficiaries and/or family members to afford to keep the property. If you own a home, multiple homes, or other real estate property in California, it is important that you speak with an estate planning attorney who can help you take the necessary measures to reduce increases in property taxes.

Contact Tisser & Standing LLP to speak with one of our Encino property tax planning attorneys. Call (818) 528-5553 to get started.

Exceptions to Property Tax Reassessment

As previously mentioned, there are some exceptions to property tax reassessment. It is possible to avoid higher property taxes for your family members/beneficiaries by leaving your real property to certain individuals, through the use of entities such as LLCs, or through some combination of the above.

These exceptions include:

  • Real property that is left to a surviving spouse
  • Primary residences that are left to surviving children
  • Non-primary residence properties left to surviving children that do not exceed $1 million (per parent) in assessed value
  • Real property that is left to the grandchildren of the property owner in the event that the grandchildren’s parents are deceased

This list is not exhaustive, and the aforementioned exceptions can be complex and often require post-mortem paperwork. It is important to seek guidance from an experienced estate planning lawyer in Encino.

Reach out to our firm at (818) 528-5553 to find out how our attorneys can assist you.

Use and Dangers of LLCs and other Business Entities

Real property owned in business entities, such as LLCs, presents unique problems and advanced strategies for dealing with property tax reassessments. Generally, when the ownership of the LLC changes, any real property within that entity should be reassessed since it effectively has a new owner.

Properties owned by an LLC (or other entity) do not qualify for the parent-child exclusion discussed above. This means that even though a building passed parents to their children, and it is assessed at below $2 Million, the entire property will be reassessed and none of the exclusion will be used because it was titled in an LLC.

Also, because the real property deed never changes (it is simply owned by the LLC), the new individual owners of the LLC must file paperwork with the California Board of Equalization to report the change of ownership. New owners often fail to do this and may have significant taxes, interest and penalties later when the change of ownership is finally reported.

LLCs can, however, help individuals transfer significantly more than $2M of assessed value to children and other beneficiaries. Depending on how the LLC acquired the property, a reassessment of the real estate in the LLC will only occur when there is either a change of control or a change of ownership of the LLC, as defined in the Revenue and Taxation Code. As long as a transfer of the LLC interest is structured not trigger one of these rules, there is no reassessment and significant amounts of real estate can be transferred without higher property taxes.

Call us now at (818) 528-5553 to make an appointment with a property tax planning attorney in Encino.

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