Estate Planning for the State – SJR-20 Resolution 57

William Dean:

Subject: Estate Planning for the State
SJR-20 Resolution 57

Gas taxes, local taxes, auto fees, sales tax revenue, tolls for bridge traffic and lastly property taxes aren’t cutting it. Hopefully, the economy will turn upward and billions in new revenue will enter the system. Unfortunately, the interaction between property taxes and capital gains taxes in California are unique because of Prop 13 and won’t increase much even though the economy may start an upward trend. Property taxes are the primary source of income for schools and local governments – close to 72%.

What to do about it?

Seniors have had enough tax breaks over the last 40 years, which is true. Fortunately, the problem is the solution to creating billions in property tax revenue early. Allow those very seniors to sell without paying capital gains, or possibly double the exemptions. Remember, there is the escape tax legislation called the ‘Step-Up-Basis-at-First-Death’ that avoids capital gains completely for the survivor.

Two of us have spent close to 90 years in the estate planning field and watched piecemeal personal interest legislation get us where we are today. The state needs a very experienced estate tax attorney for advice when planning SJR-20 Resolution 57. There are close to 1,745,000 homes here in California owned by people over 65 that are primary beneficiaries of Prop 13, especially super-Seniors over 75. Another 1,500,000 plus-ages 55-65; so the problem of senior mobility will continue to get worse. I would recommend Don Sherer, Esq, a semi-retired former senior partner in a large San Jose law firm.
You mentioned getting around Prop 13 was a no-no. Our proposed legislation would strengthen Prop 13 revenue, similar to TRA-97. A little known Assemblyman John Rasich from Ohio introduced legislation to increase the capital gain exemption from $125,000 to $250,000 per person when selling the family home. It flew through Congress.

You mentioned “the economy was stretched and feds needed revenue”. Based on solid research, the higher the property taxes the more likely seniors are to move. The opposite holds true for capital gains. The larger the gain, the less likely they are to move. And yet, these very properties offer the best property tax increase when the property is sold. The Obama proposed Capital gain increase to 20% and when California adds on 10.55% in the highest bracket, it will severely shut down sales that are already very slow.

Thanks for taking the time to talk because it’s rare. We’ve met the following and had either a written response changing the subject or no response at all:
1. Diane Feinstein – written response and changed the subject
2. Barbara Boxer – same
3. Joe Coto – appeared interested – no response
4. Elaine Alquist – met March 04, 2008 at a Democratic luncheon – material sent to her at a later date by a personal friend Frank Marolda – no response.
5. Anna Eshoo – met personally. Assistant took information – no response.
6. Mike Honda – same
7. Ira Ruskin – same – didn’t know what we were talking about.

8. Senator Lois Wolk – correspondence in response to her involvement with SJR-20 Resolution 57. Had a talk with her assistant Michael Erke – He defended the legislation.

Your legislation created another special set of taxpayers and will keep the very expensive reverse mortgage industry very much alive. It won’t stimulate sales and increase property taxes, which is the bottom line of our original SJR-20. Take a revisit. You may have a chance to make a difference.

Let’s keep in touch.

Good Luck.

James U. Hall, CLU
408-354-7083

CC Michael Erke

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