Huntington Beach, CA asked in Real Estate Law and Estate Planning for California

Q: Should there be a tax reassessment on an income property when transferred from a family trust into a LLC?

Transfer is for liability protection purpose. Husband and wife are trustees/members of the trust and the LLC. Property is located in Long Beach Calif. There is no change in percentage of ownership on the transaction before and after. We are Calif residents and the LLC is also registered in Calif. Transfer occurred in 2021.

2 Lawyer Answers
James L. Arrasmith
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Answered
  • Estate Planning Lawyer
  • Sacramento, CA
  • Licensed in California

A: In California, when property is transferred from a family trust to a limited liability company (LLC), there may be a reassessment for property tax purposes. However, there are certain circumstances under which a reassessment may not occur.

If the transfer is solely for the purpose of liability protection, and there is no change in the percentage of ownership before and after the transaction, then the transfer may be exempt from reassessment under California law. This exemption is known as the "parent-child exclusion" and applies to transfers between parents and their children, including transfers from a trust to an LLC where the children are the beneficiaries of the trust and the members of the LLC.

It is important to note that even if the transfer is exempt from reassessment, you may still need to file certain paperwork with the county assessor's office to claim the exclusion and ensure that the property tax assessment is not increased.

Additionally, if there are other changes to the property or ownership structure, such as changes in ownership percentages or the addition of new members to the LLC, reassessment may be required.

It is recommended that you consult with a qualified attorney or tax professional who is familiar with California property tax law to determine the specific tax implications of your property transfer and ensure that all necessary paperwork is filed.

Julie King
Julie King
Answered
  • Estate Planning Lawyer
  • Monterey, CA
  • Licensed in California

A: In addition to the information provided by the other lawyer, be mindful that, if an LLC or corporation owns real estate and the ownership of the company/corporation changes by MORE THAN 50%, the real estate will be reassessed for property tax purposes. You'll need to keep that in mind when doing your overall estate plan, i.e., transferring the LLC upon your passing.

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