Volume 10 - Opinions of Counsel SBRPS No. 25
Veterans exemption; Alternative veterans exemption; Senior citizens exemption (ownership) (trust beneficiary); Assessment roll (designation of owner) (trust beneficiary) - Real Property Tax Law, §§ 458, 458-a, 467, 502:
Real property held in trust solely for the benefit of a person who otherwise qualifies for a veterans, alternative veterans or senior citizens exemption may receive the same. If other trust beneficiaries are entitled to present enjoyment of the property, then it cannot be said that the property is held solely for the benefit of persons eligible for the exemption, and no exemption may be granted.
We have received an inquiry concerning eligibility for the veterans and senior citizens exemptions (Real Property Tax Law, §§ 458, 458-a, 467) where a recipient of any of these exemptions conveys his or her property to a trust. The question is who is the owner of the property for purposes of taxation (RPTL, § 502) and for determining exemption eligibility.
Prior to January 1, 1996, our opinion was expressed in 9 Op.Counsel SBEA No. 83: “[T]rust property must be assessed in the name of the trustees, and its eligibility for tax exempt status must be based upon the eligibility of the trustees” (see also, 4 id. No. 96). It remains our opinion that exemption eligibility may be based on the trustees’ eligibility.
Effective January 1, 1996, however, the veterans and senior citizens exemptions have been amended to provide that exemption eligibility may also be determined on the basis of the trust beneficiary’s status. That is, new section 458(7) [eligible funds veterans exemption, as added L.1995, c.377, § 1], new section 458-a(5) [alternative veterans exemption, as added L.1995, c.377, § 2] and new section 467(9) [senior citizens exemption, as added L.1995, c.378, § 1] each provide:
Notwithstanding any other provision of law to the contrary, the provisions of this section shall apply to any real property held in trust solely for the benefit of a person or persons who would otherwise be eligible for a real property tax exemption, pursuant to . . . this section, were such person or persons the owner or owners of such real property.
Consequently, where real property is otherwise eligible for a veterans or senior citizens exemption and title to such property is held in trust solely for the benefit of the veteran or senior citizen, the exemption should be allowed. Logically, the next question is what is meant by the phrase “solely for the benefit.”
Our research has disclosed no judicial or administrative opinion clearly on point. In interpreting the phrase, we are guided by the rules of statutory construction that statutory intent is to be determined from the language used according to its natural and obvious sense (McKinney’s Statutes, § 94) and that, if possible, effect and meaning must be given to all of the words therein (id., 98).
It is also useful to examine the legislative sponsor’s memo and the Governor’s approval message, if any. For example, the sponsor’s memo for Senate Bill No. 1105 (subsequently enacted as c.377) states, in part:
Under present New York State policy, a veteran’s real property tax exemption is lost when he/she transfers his/her property into a trust, even if he/she is the grantor of the trust and the sole beneficiary. [citing 4 Op.Counsel SBEA No. 96] This bill would make it clear that the exemptions . . . extend not only to property legally owned by veterans, but also to property which, though not technically owned by such a person, is, in fact, held in trust solely for the benefit of such a person. (Memo reprinted in 1995 McKinney’s Session Laws, p.2123 {1} )
In approving chapter 378, Governor Pataki also referred to the senior citizen establishing a trust with himself or herself as the sole beneficiary thereof (1995 Approval Message No. 47 reprinted in 1995 McKinney’s Session Laws, p.2335).
Taken together, along with the general proposition that tax exemption statutes are to be strictly construed (McKinney’s Statutes, § 294), we must conclude that the legislative intent was that that portion of the trust assets constituting the real property for which exemption is sought must be held solely for the benefit of persons otherwise eligible for the exemption. If other trust beneficiaries are entitled to present enjoyment of the property, then it cannot be said that the property is held solely for the benefit of persons eligible for the exemption, so no exemption may be granted. If these other trust beneficiaries will benefit from the real property only after the death of the exemption eligible trust beneficiaries, such future interest would not adversely affect the exemption. The relative benefits created by trusts will need to be examined on a case-by-case basis.
March 19, 1996
{1} A similarly worded memo accompanied Senate Bill No. 1109, subsequently enacted as chapter 378, although that memo also included the statement, “Older persons often place their property in a Living Trust in order to avoid probate.”
