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Volume 10 - Opinions of Counsel SBRPS No. 27

Opinions of Counsel index

Assessment roll (designation of owner) (revocable and irrevocable trusts); Assessments, generally (inventory) (trusts); Exemptions, generally (transfer to non-exempt owner) (termination of trust) - Real Property Tax Law, §§ 500, 502, 520:

Where property is held in a revocable or irrevocable trust, the property should be assessed to the trustee, so long as that person remains trustee, the property continues to be included in the trust corpus and the trust remains in effect. Where property held in trust receives an exemption, should the trust be revoked and the revocation results in the passing of title to real property formerly included in the trust corpus to someone ineligible to receive such exemption, the provisions of section 520 of the RPTL should be used to remove the exemption.

Our opinion has been requested concerning the senior citizens exemption (Real Property Tax Law, §467). Specifically, the question is whether the exemption may be granted when the senior citizen places his or her property into a revocable or irrevocable trust of which he or she is the lifetime beneficiary.

The determination of property ownership is part of the annual process of preparing the assessment roll (Real Property Tax Law, §§500(1), 502(2)). Consequently, in determining property condition and ownership as of taxable status date (RPTL, §302), the assessor must be cognizant of property held in trust just as he or she must be cognizant of property held in other forms of ownership.

This may necessitate obtaining a copy of the trust instrument itself, especially if the property may qualify for an eligible funds veterans, alternative veterans, or senior citizens exemption (RPTL, §§458, 458-a, 467, respectively). For, as we wrote in 10 Op.Counsel SBRPS No. 25:

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. [emphasis in original]

The new provisions of law (i.e., §§458(7), 458-a(5) and 467(10) [the last as renumbered L.1996, c.568, 3]) extending exemption eligibility to trust beneficiaries do not distinguish between revocable and irrevocable trusts.  {1}  It is well settled New York law that even the reservation of an absolute power of revocation by the settlor of a trust does not affect the validity of the instrument creating the trust or the passing of legal title to the trustee (Van Cott v. Prentice, 104 N.Y. 45, 10 N.E. 257 (1887); Schreyer v. Schreyer, 101 App.Div. 456, 91 N.Y.S. 1065 (1st Dept., 1905), aff’d, 182 N.Y. 555, 75 N.E. 1134 (1905)).

Thus, for real property tax purposes, it makes no difference whether property is held in a trust which is revocable or irrevocable. That is, under either type of trust, the trustee takes title and is the legal owner of the property (see, 4 Op.Counsel SBEA No. 96 and 9 id. No. 83). The property should be assessed to the trustee, so long as that person remains trustee, the property continues to be included in the trust corpus and the trust remains in effect. Exemption eligibility may be determined on the basis of the trustee’s eligibility therefor. Of course, as is discussed above, so long as the trust is in effect, eligibility for exemption pursuant to sections 458, 458-a and 467 may also be determined on the basis of the trust beneficiary’s status. Where property held in trust receives an exemption, based on the trustee’s, or, in the case of veterans and senior citizens exemptions, the trust beneficiary’s eligibility, should the trust be revoked and the revocation results in the passing of title to real property formerly included in the trust corpus to someone ineligible to receive such exemption, the provisions of section 520 of the RPTL should be used to remove the exemption.

October 7, 1996


{1}  Note that irrevocable trusts may be revoked under certain conditions (see, Estates, Powers and Trusts Law, §7-1.9(a)).

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