California SC Holds That Transfer of Trust Property to Life Estate Holder Is Ownership Change

The California Supreme Court rules that following a trust grantor's death, local tax authorities properly reassessed the value of trust property occupied by a life estate holder because the transfer of equitable interest constituted a change in ownership of the property. Steinhart v. County of Los Angeles (Cal., No. S158007, Feb. 4, 2010).

Esther Helfrick established a revocable trust, naming herself as trustee, and transferred her residence into the trust. The trust provided that upon Ms. Helfrick's death, her sister, Lorraine Steinhart, would have the right to live in the residence until she died as long as she maintained the property and paid expenses. After Ms. Steinhart's death, the residence would be sold and the proceeds would be distributed to Ms. Helfrick's surviving siblings. After Ms. Helfrick died, the County of Los Angeles reassessed the property and determined that it was worth five times the previously assessed value. In initiating the reassessment, the county relied on a statutory provision that authorized reassessment of the tax value of real estate when there was a "change in ownership."

Ms. Steinhart paid the higher taxes for the next three years, but in 2004 she requested a refund, asserting that no "change in ownership" had occurred within the meaning of the tax statutes and that the county shound not have reassessed the property. When the county denied Ms. Steinhart's request, she filed suit. The trial court granted the county's motion to dismiss, holding that the transfer to Ms. Steinhart of a life estate was a change in ownership. Ms. Steinhart appealed, and an appeals court reversed, finding that no change in ownership of the trust property occurred on Ms. Helfrick's death. The county appealed.

The Supreme Court of California reverses the appeals court and rules that a change of ownership occurred when, upon Ms. Helfrick's death, the entire equitable estate in the residence was transferred from Ms. Helfrick to Ms. Steinhart and the remainder beneficiaries. As such, the county was required to reassess the value of the property.

To download the full text of this decision in PDF format, go to: https://www.courtinfo.ca.gov/opinions/documents/S158007.PDF.
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