A comprehensive estate plan will typically include a wide variety of legal documents, tools and strategies. One common addition to an estate plan is a trust agreement. Almost any type of assets may be used to fund a trust once it has been created, including real property. If you are planning to transfer real property into a trust you may be wondering “ Do property taxes change if I create a trust? ” Because of the individual nature of trust agreements, and the differences in state tax laws, there is no universally applicable answer to that question; however, because the answer may be “yes” it is critical that you consult with your Missouri estate planning attorney when you create your trust to find out whether your property taxes will change.
Although trusts have evolved over the last century to the point where there is a specialized trust for almost any circumstance, all trust continue to fall into one of two categories – testamentary and living trusts. A testamentary trust is one that does not take effect until your death while a living trust is one that takes effect as soon as all the formalities of creation are complete and the trust is funded. Because a testamentary trust does not actually take effect until your death, assets are not transferred into the trust until that time. Therefore, there is no immediate change of ownership. A living trust, on the other hand, does require immediate funding. If you choose to use real property to fund the trust the real property will become a trust asset. Once the property is transferred into the trust a change of ownership has occurred.
In many jurisdictions, when there is a change of ownership for real property the assessor is required to reassess the property for the purpose of determining the property’s current fair market value. If the current value of the property has changed, the property taxes due on the property may also change. Moreover, you may be required by local rules to report the change of ownership to the appropriate county office. To avoid any penalties or fines it is best to check with your estate planning attorney before you effectuate the transfer of real property into trust to ensure that you are clear on your obligations and expectations with regard to property taxes.
If you have additional questions or concerns about trusts or estate planning in general, contact the experienced Missouri estate planning attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC by calling (314) 966-8077 to schedule an appointment.