Transfer of your Home to Living Trust Causes Loss of Senior Citizen Exemption

So someone told you that you could save tax money by transferring your home to a living trust. When it comes time to sell your home and pay the realty transfer fee, consider the following: if your home is in the name of your living trust, you must pay the full realty transfer fee and you lose the senior citizen exemption if you are more than 62 years old.

The realty transfer fee for a home selling for $500,000.00, for example, is $4,175.00. The senior citizens’ exemption realty transfer fee is $1,925.00.

In Terrell v. Director of Division of Taxation, 22 N.J. Tax 297 (2005), the Court ruled that even though the plaintiffs, whose home ownership was in the name of a living trust, were more than 62 years of age, they could not claim the exemption from the realty transfer fee. The statute creating the exemption for senior citizens states that the grantor must be a senior citizen. A trust cannot be a senior citizen. Furthermore, the burden is on the party claiming a tax exemption to clearly bring itself within the exemption. The court found the plaintiffs did not meet this burden.

The estate planning attorneys at Pidgeon & Pidgeon can advise whether your estate plan should include a living trust and whether your home should be transferred to the trust.