Real estate can be a client’s most valuable possession and investment. Over the last half century, California real estate has grown substantially, despite periodic downturns in the market. Our firm advises property owners, including homeowners, on a variety of state and federal laws which affect their ownership, taxation and the use of real property.
Ownership Structuring
Holding title to real property in an appropriate manner can save on taxes and provide liability protection. Single people in California can hold title as tenants in common or as joint tenants, while married people can hold property as tenants in common, as joint tenants or as community property. You should understand the difference between these forms of title before taking title to property. In addition, grant deeds and quitclaim deeds offer different levels of protection in the event of a problem with the property’s title. This difference can mean someone else has to clean up the title problems, or it could mean that you have no legal rights at all in the real property you received.
To avoid an expensive probate, your California personal residence should generally be held in a trust. Joint tenancy deeds can trigger an immediate property tax reassessment, and possibly a gift tax, and they throw away a basis step-up on fifty percent (50%) of the property at your death. “Transfer on Death” deeds avoid a lifetime gift tax, but the property is subject to creditor claims at your death. Community property with right of survivorship is often the best option because it combines automatic transfer at death with a step-up in tax basis.
Business
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Business
The best way to save money on your business taxes? Effective tax strategy and planning. Let us show you how you can maximize your profits.
In contrast, the best way to hold title to investment property is generally in an entity to limit your potential personal liability. Which form of entity to choose, how many properties to hold in each entity, and how best to govern that entity to provide creditor protection and keep control in the family depends on your particular property and situation.
We regularly advise property owners on their options for holding title, and assist them to make transfers that accomplish their goals without triggering unnecessary taxes or exposing them to increased risks.
Property Tax
In early 2021, Prop 19 virtually eliminated the Parent-Child Exclusion for California homeowners. It also changed and expanded the ability of taxpayers over age 55 to transfer their property tax basis from one home to another.
Tax Planning
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Tax Planning
From managing your estate taxes to minimizing your gift taxes, we’re pros at helping you use tax planning to manage your money wisely.
The rules for reassessing the tax on real estate held in entities are complicated and confusing, applying differently to properties contributed to an entity than to those purchased by the entity. In certain circumstances, leases can trigger a reassessment, or the non-renewal of a lease can result in a shift in the party responsible for paying the taxes. Failure to correctly and timely report such transfers can result in stiff tax penalties on top of back taxes. The entity transfer rules became even more important with the loss of the Parent-Child Exclusion for property other than a primary residence.
We regularly advise homeowners, investors and business owners on the effects of Prop 19 and other transfer rules, assist them with making transfers, and prepare required reports for the County and the Board of Equalization to avoid triggering reporting penalties.
Trust and Estate
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Trust and Estate
It’s not just how much money you save, it’s how much you’re able to pass on to your heirs. With the correct strategy, you’ll preserve your wealth.
Transfers
Transferring real estate can trigger a variety of taxes including: the 20% capital gains tax, the 25% recapture tax (for depreciated property), gift, generation-skipping, estate and/or property taxes. Even leases and life estates can trigger a property tax reassessment or cause the loss of the Parent-Child Exclusion. We advise clients before transfers occur on which taxes may apply and how to minimize or defer them. We also assist clients with certain transfers, including sales to related parties and transfers into and out of trusts and entities to avoid inadvertently triggering a reassessment.
