Transferring a home or property to an irrevocable trust does not automatically trigger a property tax assessment.

A property’s assessment is based on the property’s market value. Market value is how much a property would sell for under normal conditions. All properties in New York, except for those in New York City and Nassau County, are required to be assessed each year. Assessments are determined by a local official who estimates the value of all real property in a community.

Most municipalities reassess property taxes annually regardless of who or what currently owns a property—a person, a business, a revocable trust, or an irrevocable trust. Even if the change of ownership to a trust does lead to an earlier reassessment, the reassessment does not always lead to an increase in taxes.

What are the benefits of transferring property to a trust?

There are many advantages to transferring property to a trust despite the potential for a reassessment. For example, many clients choose to transfer their home to a type of irrevocable trust known as a Medicaid Asset Protection Trust (MAPT). An MAPT can protect your home from a Medicaid lien at death should you receive care at home paid for by Medicaid during your life. Additionally, once a property is in the irrevocable trust for five years, the property is no longer considered an available resource when applying for nursing home Medicaid.

Even if your home is owned by an MAPT, rest assured that you will still receive the same real estate tax exemptions that you received when your home was owned in your individual name.

Examples of Real Estate Tax Exemptions You Retain With an MAPT

The NY State School Tax Relief (STAR) program is available where the property is the primary residence of at least one owner. To be eligible, all owners and their spouses who live on the property must have a combined income of no more than $250,000.

The Enhanced STAR (E-STAR) program benefit is available when the home is a primary residence of at least one owner who is at least 65 and the combined income of all owners must be limited to $107,300 or less. Regardless of a homeowner’s age or income, there are also exemptions available to veterans and those who are disabled.

Irrevocable Trusts Are Powerful Tools

Transferring a property to an irrevocable Medicaid Asset Protection Trust is a great option for those looking to avoid probate and also protect the primary residence if they need to access long term care through the Medicaid program, without necessarily triggering a reassessment or changing your current tax status.

By Britt Burner, Esq. & Erin Cullen

Britt Burner, Esq. is a Partner at Burner Prudenti Law, P.C. focusing her practice areas on Estate Planning and Elder Law. Erin Cullen is a graduate of the Maurice A. Dean School of Law at Hofstra University. Burner Prudenti Law, P.C. serves clients from New York City to the east end of Long Island with offices located in East Setauket, Westhampton Beach, Manhattan, and East Hampton.

What is a Medicaid Asset Protection Trust?

Medicaid Asset Protection Trusts, sometimes called Irrevocable “Income Only” Trusts or Medicaid Trusts, are used to protect assets and allow people to qualify for Medicaid long-term care. In order to protect the assets, the trust must be created 2.5 years before home care Medicaid is needed or 5 years before nursing home care is needed.

January 9, 2021

What Are the Tax Implications of Transferring Property Into a Trust?

While a trust technically becomes the owner of your home when you sign a deed transferring ownership to a grantor trust, rest assured that you will still receive the same real estate tax exemptions and/or benefits that you received when your home was owned in your individual name.

November 19, 2024