You asked how living trusts are treated for purposes of property tax exemptions in Connecticut and nearby states.

LIVING TRUSTS

A trust is a legal device designed to provide financial assistance to someone without giving that person total control over the trust assets. A living (“inter vivos”) trust is one created and activated while the person who drafted it (the settlor) is still living. Such trusts can be revocable or irrevocable. In a revocable living trust, the settlor normally appoints himself as the first in a series of trustees and remains in control of his assets as long as he is alive and competent. He normally must transfer all of his assets to the trust and thereafter controls their use as his own self-appointed trustee. In an irrevocable trust, the settler cannot change his mind.

TAX TREATMENT IN CONNECTICUT

The Connecticut Judicial Department has prepared a pamphlet on living trusts, which is available online at http: //www. jud. state. ct. us/probate/UnderstandingTrusts. pdf. The pamphlet encourages people considering establishing trusts to carefully weigh the associated property tax ramifications, because the transfer of property into a trust may invalidate an existing tax exemption. This is because many exemptions are tied to the taxpayer’s status, for example being a veteran. When a trust is established, property such as a home is routinely transferred into the trust. As a result, the trust, rather than the settlor becomes the property’s owner and the exemption may end because the trust does not meet the conditions of the exemption, e. g. , being a veteran.

According to Office of Policy and Management staff, the issue of whether an exemption is terminated with the creation of a trust depends on who is responsible for paying the tax. If a settlor himself, as distinct from the trust, is responsible for paying the tax, the exemption could continue pursuant to CGS Sec. 12-48.

TAX TREATMENT IN OTHER STATES

In Rhode Island, property that was previously eligible for a tax exemption remains eligible if it is placed in a revocable living trust but not if it is placed in an irrevocable trust (R. I. Gen. Laws Sec. 44-3-38). We were unable to find relevant statutes or court cases on this issue n the remaining New England states.

In New York, real property that is held in trust solely for person who qualifies for a veteran’s or senior citizen’s exemption remains eligible for the exemption. But if other persons are entitled to present enjoyment of the property, the exemption no longer applies (10 Op. Counsel State Board of Real Property Services No. 25 (1996)). Similarly, if there are two trustees and one does not meet all of the qualifications of the exemption, the property is subject to taxation (6 Op. Counsel State Board of Equalization and Assessment No. 46 (1982)).

In New Jersey, the veteran’s exemption can be claimed by a trustee or other fiduciary for a person who would otherwise be eligible for the exemption (N. J. Rev. Stat. Sec. 54. 4-8. 18). The ownership requirement of New Jersey’s circuit breaker exemption can be met by a person who holds a beneficial interest to property when another person holds legal title to the property (N. J. Rev. Stat. Sec. 54. 4-8. 41). Thus, the court upheld the continuation of an exemption when a couple placed their home in a revocable trust and they continued to live in the home, maintained it, and paid property taxes on it (Warren v. Jackson Twp. , 1 N. J. Tax 536 (1980)).

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