Real Estate – Global Estate Blog

New Probate Hack – Real Property Succession (Primary Residence – $750,000)

For any California resident who passes away after April 1, 2025, if her or his interest in a primary residence was valued at less then $750,000 (at the time of death), the successors in interest (e.g. surviving children or relatives) can file a Petition to Succeed to the Real Property (v. a more extensive Probate Administration.)

If the decedent died before April 1, 2022, the date of death value for Petition allowance is limited to $166,250.

Usually a Petition can be heard within 3-6 months from the date of filing. It is not unusual to have at least one Court continuance where the Probate examiner requests additional information or procedural notices.

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Tip for Property Buyers

When seeking to purchase a residential property, most will engage a licensed Real Estate agent.

An initial crucial decision will be the listing (sale) price.

The agent owes the seller a fiduciary duty to act in the seller’s best interest.

The agent receives a commission as long as the agent successfully finds a prospective buyer that meets the listing price.

Generally, if there is a willing buyer for the listing price, the seller is obligated to pay the commission, irrespective of the seller’s decision to later terminate the agent or the deal, or if the seller hires a new agent.

In this context, one most beware of the possibility that the agent may set the listing price too low, ensuring the commission and an expedited sale.

The agent fears a high listing price without a buyer and no commission.

While it is prudent to set a realistic price, the agent still owes a fiduciary duty to obtain the best possible deal, this usually means the best possible market price.

So don’t be too quick to agree to the agent’s recommended listing price.

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The Pitfalls of Re-Financing California Real Estate

Re-financing Real Property has increased lately due to low interest rates.

Sometimes a borrower will need to add a third party in order to qualify for the loan.

This could be parent or other third party (e.g. brother, uncle, or in-law).

If the co-signor is not an exempt spouse or child, the borrower risks a partial property tax increase.

It is well advised to consult an attorney to confirm whether the situation possess a risk of tax re-assessment.

Under the right circumstances, the attorney can help the borrower avoid any tax increase, even if the co-signor is a non-exempt individual, such as a parent or grand parent.

For more information, please contact the Law Offices of Hanlen J. Chang.

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California Statewide Rent Control Exemptions

AB 1482, California’s statewide rent control (limiting annual rent increases and imposing just cause eviction restrictions) has several property owner category exemptions, for most of pertinent are:

1. Single-family owner-occupied residences, including a residence in which the owner-occupant rents or leases no more than two units or bedrooms, including, but not limited to, an accessory dwelling unit or a junior accessory dwelling unit.

2. A duplex in which the owner occupied one of the units as the owner’s principal place of residence at the beginning of the tenancy, so long as the owner continues in occupancy.

3) Housing that has been issued a certificate of occupancy within the previous 15 years.

4. Residential real property that is alienable separate from the title to any other dwelling unit, provided that both of the following apply:

(A) The owner is not any of the following:

(i) A real estate investment trust, as defined in Section 856 of the Internal Revenue Code.

(ii) A corporation.

(iii) A limited liability company in which at least one member is a corporation.

The most common exemption are residential homes and condominiums under category 4 (assuming the property does not otherwise qualify for municipal and city specific rent control.)

One type of real property that may not be exempt are “quasi-condo” structures under tenancy in common arrangements.

LLCs are also exempt, as long as no corporation has a membership interest.

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Multiple Properties – Tax Benefit of LLC (Pre-Death Planning Opportunity Only)

Under California Proposition 58, the Parent to Child Exclusion for transfer of the pre-exisiting Proposition 13 tax base is unlimited for one residential property, plus one million ($1,000,000.00) per parent spouse for non-residential property (maximum two million [$2,000,000.00] if two parents).

For an owner of an investment property or properties exceeding two million, tax planning for purposes of preserving the pre-exisiting Proposition 13 tax base can be accomplished through the use of a business entity, e.g. LLC or L.P.

The tax re-assessment rules for a business entity holding real property differs in that it depends on 1) a change of control of more than 50%; or 2) more than 50% of the original co-owners change.

Importantly, any Business Entity planning and structuring regarding the investment property is only possibly before the owner dies.

As time goes on there will be more LLCs created as more real properties will be worth one million or more and more tax assessment will catch up to that threshold.

For a consultation regarding this topic please contact the Law Offices of Hanlen J. Chang.

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