Legal Question in Real Estate Law in California

My MIL just retired and is a US permanent resident from the UK. She owns a house in California which she rents out to college students. She wants to move back to the UK for good, but was told her property taxes would skyrocket if she did so. She's considering selling the house (and losing the associated rental income). She sold her other property to finance the initial move and told us she wanted to hold onto this property as an inheritance for her 3 children.

Would a living or family trust be a good way to keep her taxes the same as they are now so she can avoid selling the property? Her 2 sons both still live in the state.


Asked on 3/20/14, 11:42 pm

1 Answer from Attorneys

Your MIL is misinformed. There is no California law that taxes non-resident owners differently than resident owners on real property taxes. Some states have such provisions, usually states with large numbers of vacation homes, such as Hawaii. California does not do that. If she uses a property management company, they would have to start withholding 7% of her rental income if she leaves the state, sort of like income tax withholding on a pay check. Also, if she were to simply deed the property to the three children now, there would be seriously higher taxes once THEY went to sell the property. Those are the only things I can think of that her misinformation might be based on. Taxation aside, however, an inter vivos trust is a great idea 99.99% of the time when dealing with real estate you want to leave to your children. It is VERY tax-favored once you pass away.

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Answered on 3/21/14, 9:16 am


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