This case examines an ad valorem tax on real property that is applied upon a
change in ownership. Esther Helfrick established a revocable trust, made herself
trustee and sole beneficiary during her lifetime, and transferred her residence
to the trust.
Upon Helfrick’s death on March 21, 2001, the trust became irrevocable and
Helfrick’s sister, Lorraine Steinhart, received the right to occupy and use the
residence during her lifetime. On Steinhart’s death, the trustee would sell the
residence and distribute the proceeds to Helfrick’s then living siblings and the
living descendants of any deceased siblings.
After Helfrick’s death, the County of Los Angeles reassessed the residence
and sent property tax bills to Steinhart. Steinhart paid the tax bills, but
filed a claim with the county auditor seeking a tax refund, asserting that no
change in ownership had occurred to trigger reassessment.
The county auditor denied Steinhart’s claims, and Steinhart filed an action
against the county, seeking refund of the taxes. The county demurred, stating
that Steinhart failed to exhaust her administrative remedies before filing suit,
and alternatively, that the Revenue and Taxation Code section 60 defined a
change of ownership to include the transfer of a life estate to a non-spouse
The Supreme Court of California examined the procedural issues and held that
Steinhart’s claim failed as a matter of law because Steinhart had failed to
exhaust her administrative remedies; the county was not estopped from relying on
Steinhart’s failure; and no exception was applicable.
Nevertheless, the court elected to address the change in ownership issue. The
court recognized that under general principles of trust law, Helfrick’s transfer
of the residence to the trust, of which she was the sole present beneficiary and
which she held the power to revoke, was not a change of ownership because
Helfrick continued to hold the equitable estate or beneficial interest in the
property. However, upon Helfrick’s death, the trust became irrevocable and the
entire equitable estate in the residence transferred from Helfrick to Steinhart
and her siblings.
The court held, based on the statute and accompanying regulations, that
whether a change in ownership occurred depended on the interest Helfrick
transferred, rather than the interest received by Steinhart, as Steinhart
argued. Therefore, a change in ownership occurred within the meaning of the
statute because the entire equitable estate in the property was transferred upon
Kelly L. Hellmuth is the principal author of this release.