Question:
We are thinking of putting my dad’s home in a trust! He has a 15-year mortgage and we have been told if we do this then all the property tax and insurance will be based on my age and will skyrocket, since I would have the only interest in the property! Is this true? Would a life estate be better?
Response:
That’s an excellent question and one that’s often neglected. Often property owners get real estate tax benefits because the house is owner-occupied or they qualify as seniors, veterans, or individuals with disabilities. They can lose these if they change the form of ownership.
The problem with answering your question is that it’s totally jurisdiction-dependent. Many cities and towns will extend the benefit to a revocable trust, but not an irrevocable trust, as long as the person residing in the house is one of the trustees. Others will not. As you suggest, many municipalities will also accept life estates. To get an answer, you will have to ask the tax assessor in the town in which the property is located.
Also, make sure that any transfer doesn’t cause issues with the mortgage. Given that interest rates are now much higher than they were a few years ago, you don’t want to have to refinance the property.
