Over the last several decades, trust agreements have evolved from something only the very wealthy used to pass down the family fortune, to something the average person commonly includes in his or her estate plan. If you are considering the addition of a trust agreement into your estate plan you may have a number of questions and concerns regarding the agreement. One common question we hear if people plan to fund the trust with real property is “ Do property taxes change if I create a trust? ” The answer to that question depends on a variety of factors, but it could be “yes”.
Trusts all fall into one of two categories — testamentary or living trusts. A testamentary trust is one that does not take effect until your death while a living trust takes effect once the formalities of creation are complete. A living trust can be further sub-divided into revocable and irrevocable trusts. All trusts require you to appoint a Trustee who will oversee the administration of the trust terms and manage the trust assets. Likewise, all trusts require you to provide sufficient assets to fund the trust. Almost any type of assets may be used to fund a trust, including real property.
If you choose to transfer real property into a trust the property then becomes the property of the trust. In other words, a change of ownership occurs. Anytime there is a change in ownership of real property there is a chance that the property taxes assessed against the property will change as well. In fact, it is common for local rules to require the assessor to come out and reassess the property to determine its current value when real property changes ownership. If the value of the property increases, so will the taxes owed on the property.
If you plan to create a trust and transfer real property into the trust it is in your best interest to discuss any possible repercussions of the transfer with your estate planning attorney ahead of time. Failing to do so could result in hefty fines or penalties if the change in ownership does cause an increase in property taxes due on the property.
If you have additional questions or concerns about funding your trust agreement, or your Illinois estate plan in general, contact the experienced Illinois estate planning attorneys at Nash Bean Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.
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