California Proposition 58 Update

In July of this year, we wrote about some techniques used by trustees of family trusts to circumvent Revenue and Taxation Code 63.1 when filing claims for reassessment exclusions. The California Assessors’ Association (CAA) is reviewing its training for staff on transactions involving share and share alike trusts and estates. Some of the improvements to training on exclusions for reassessment that are under consideration by the CAA include:

  1. Awareness and detection of strategies used to circumvent Revenue and Taxation Code 63.1
  2. Better analysis of trust documents
  3. Requirements for supporting documentation
  4. Verification that funds were provided by a third-party lender

As we discussed in our July report, we were unclear on whether there would be a “claw back” on previously granted exclusions. One Assessor’s office recently “unapproved” an exclusion for reassessment that was granted over one year ago. Apparently, the property was taken out of the trust in order for the acquiring beneficiary to comply with a conventional lender’s requirement on a refinance. The proceeds from the refinance to the acquiring beneficiary were used to equalize the distribution of the trust. The main issue in this situation is the contribution of capital by the acquiring beneficiary. The Board of Equalization views this as a sibling buying out another sibling. It was not caught initially, but this particular Assessor’s office went back and reviewed previously approved exclusions when a trust was the grantor of the property. The advising attorney on the transaction is now working for free to try and rectify the situation.

After the CAA is done reviewing its current training on share and share alike transactions involving trusts and estates, they will review potential changes to the form BOE-58-AH. The proposed changes to this form include final accounting for trusts and estates with multiple heirs / beneficiaries and proof of funding of 3rd party loans. Changes to form BOE-58-AH will be considered in January of 2020.

We will keep you updated as more information is available.

Hours Thank you for visiting CaliforniaProposition58.org. CaliforniaProposition58.org is not a government agency and not affiliated with the State of California.
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