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Subject:  Re: 401K/IRA in probate Date:  12/10/2018  8:12 PM
Author:  ptheland Number:  128261 of 130022

Color me confused, but why will the estate owe more?

Since I'm in CA, let me take a shot at that.

Yes, it has to do with Prop 13. Under Prop 13, only certain heirs can retain the decedent's property tax base. As noted, siblings are not one of the approved heirs. (Children can inherit and keep the property tax base.)

So as of the date of death, the property taxes increase (I'm assuming an increase in value of the property while the decedent owned it rather than a decrease) because a sibling is the heir. Of course, it takes some time for the county assessor to learn of the death, find out who the heirs are, then value the property for property tax purposes. That new tax valuation and date is then passed on to the county tax collector who calculates the new tax and sends the bill to the owner. In CA, these are called supplemental assessments. They supplement the original tax bill.

It does not surprise me that vkg was able to sell the house before the supplemental assessment was finalized and issued. For more routine sales, it can take many months to get the supplemental assessment. I would not be surprised if a supplemental assessment for a transfer at death takes longer, since the assessor needs to gather more information than for a routine sale.

In this particular case, it sounds like the supplemental assessment will cover the period from the date of death (when the tax base increased) to the date of sale (when the subsequent buyer will get their own assessment based on the price paid for the property). Her wording isn't the best, but I think I recognize the gist of the issue.

Like her, I am surprised that the title company who issued the title insurance policy for the benefit of the buyer and/or lender didn't insist on a provision for this supplemental assessment in the sale closing. If they didn't do so, they could certainly be on the hook for the assessment. It does sound like vkg is planning to do the right thing and pay the supplemental property tax assessment - which she would have done in the sale closing had everyone been on the ball. Then again, perhaps a close look at the closing settlement statement will show that those taxes were provided for in the closing. There's no way to know for sure without seeing the complete settlement statement and understanding each line on it.

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