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Encino Property Tax Planning Lawyers

Minimize Higher Real Estate 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 a real estate can increase significantly more than the property tax basis. When ownership finally changes and the property is reassessed to its current fair market value, property taxes rise dramatically.

The transfer of real property, either as a gift, sale, or inheritance, is considered a change of ownership. Without proper planning, these increased taxes can make it difficult for your beneficiaries to afford to keep the property.

If you own a home, multiple homes, or other real estate in California, speak with a probate and estate planning attorney. We can help you take measures to reduce increases in property taxes so your loved ones can benefit from tax savings.

Contact Tisser Law Group, APC at (818) 528-5553 to speak with one of our Encino property tax planning attorneys.

Avoiding Property Tax Reassessment in California

As previously mentioned, there are some exceptions to property tax reassessment.

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 grandchildren in the event that the grandchildren’s parents are deceased

You may be able to avoid higher taxes for your beneficiaries by passing on your real property through entities such as LLCs. You can also use some combination of the above mentioned exceptions and entities.

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

Using LLCS to Mitigate Property Tax

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.

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

Also, because the deed never changes, new owners must file with the California Board of Equalization to report a change of ownership. New owners often fail to do this and may have significant taxes, interest, and penalties later when the change 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 will only occur when there is:

  • Change of control, or
  • Change of ownership of the LLC

As long as a transfer of the LLC interest is structured not trigger one of these rules, there is no reassessment. Significant amounts of real estate can be transferred without higher property taxes.

Call our Encino law firm now at (818) 528-5553 to get started on your property tax plan.

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