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Volume 4 - Opinions of Counsel SBEA No. 96

Opinions of Counsel index

Aged exemption (ownership requirement) (trust beneficiary) - Real Property Tax Law, § 467:

A trustee-beneficiary does not meet the ownership requirement for purposes of obtaining an exemption under Real Property Tax Law, section 467, on real property title to which is in two trustees, one of whom does not meet all of the requirements of this section.

Our opinion has been requested concerning the ownership requirement of section 467 of the Real Property Tax Law, which authorizes a partial real property tax exemption on the owner-occupied residence of certain aged persons. The facts are that a man held sole title to the family residence at the time of his death in 1967. His will directed that a portion of his estate be given outright to his wife, with the remainder to be held in trust for the benefit of his wife for her life, and the remainder of that trust to his daughter. However, as the situation developed it became apparent that the precise distribution of assets called for in the will could not be carried out unless the family home were to be sold. The widow was opposed to such sale, and in a formal proceeding in Surrogate’s Court it was decided that she would receive all of the cash from the estate (some $33,000) to partially fulfill her bequest, and the house and certain stock would be placed in the trust. Pursuant to this settlement the widow would continue to solely occupy the premises, and she agreed to pay all real property taxes thereon. The trustees of the trust are the owners of the residence, i.e., the widow herself and the daughter. The question is whether the widow in her capacity as beneficiary under the trust meets the “ownership” requirement of section 467.

Section 467 provides that real property owned by persons aged sixty-five years or over with limited incomes shall be exempt from taxation to the extent of 50 percent of the assessed valuation thereof provided that the municipality in which the property is located, after holding a public hearing on the matter, adopts a local law, ordinance or resolution granting the exemption. Where title is held by more than one person (except husband and wife) each such person must be sixty-five years of age or over. The statute also sets forth a length of ownership requirement, currently sixty months which will be reduced to twenty-four months as of January 1, 1975 pursuant to chapter 1004 of the Laws of 1974. Under this length of ownership requirement, where sole title to real property vests in a surviving spouse by devise or descent from the deceased spouse, both periods of ownership may be combined to satisfy this requirement.

We believe that under the facts in this case, the widow, in her capacity as beneficiary under the trust, does not meet the ownership requirement of section 467. We note that upon the death of her husband, sole title did not vest in her (a discussion as to the ownership requirement of section 467 relating to the vesting of title following the death of a person who formerly held sole title is contained in 1 Op.Counsel SBEA No. 41), and that she is presently not sole owner of the property in her capacity as one of the trustees of the trust (a discussion as to title held by two or more persons is contained in 1 Op.Counsel SBEA No. 110), and therefore the widow cannot claim sole ownership status for purposes of the exemption authorized by section 467.

Pursuant to subdivision (a) of section 7-2.1 of the Estates, Powers and Trusts Law, an express trust vests in the trustee the legal estate, subject only to the execution of the trust, and the beneficiary does not take any legal estate in the property although he may enforce the trust. As legal title to the corpus of a trust is in the trustee, real property in a corpus is taxable to the trustee (People ex rel. Van Norden Trust Co. v. Wells, 118 App. Div. 881, 103 N.Y.S. 874, aff’d, 192 N.Y. 552, 85 N.E. 1114).

Of special relevance to this inquiry is the case of People ex rel. National Commercial Bank & Trust Co. v. Lewis, 179 Misc. 140, 39 N.Y.S.2d 64, wherein it was held that property, the title to which was held by a trustee, was subject to taxation although the “equitable owner” was a person who would have been entitled to an exemption. In that case title to certain real property, purchased for the sole use of the American Red Cross and being used by such organization as its Chapter Headquarters, was vested in the trustee National Commercial Bank and Trust Company. By terms of the contract of sale, the corporate trustee was to hold title to the property for the benefit of the Red Cross until the purchase price was paid. In holding the property taxable the court noted:

The theory of the tax statute is that the land itself is the primary subject of the assessment, Tax Law, Sect. 9 [now Real Property Tax Law, § 304] and the assessment is properly to be made against the owner of the record title.

The exemption which accrues to “the real property of” the beneficiary under Tax Law, Section 4, subdivision 6 [now Real Property Tax Law, § 421] does not extend to the trustee. The Red Cross is not the owner of the real property in this instance. It is the owner of an equitable right, enforceable upon the happening of a future contingency.

Under general principles of law the tax assessment is to be made against the trustee and not the equitable beneficiary. (emphasis supplied)

Accordingly, legal title to real property in a trust is in the trustee(s) , such property is to be assessed for purposes of taxation in the name(s) of the trustee (s) and not the beneficiary, and therefore it would follow that such ownership must be considered in any claim for exempt status. The fact that a beneficiary under a trust may agree to accept responsibility for the payment of taxes, as apparently occurred in this situation, would not, of itself, vary this conclusion (see, 1 Op.Counsel SBEA No. 59). (It is also observed that the daughter in this case, who is also a trustee does not meet certain requirements of section 467, e.g., age, residence and occupancy.)

The Attorney General has stated (1968, Op.Atty.Gen. 40) that a legal life tenant is deemed to be the owner of real property for taxation purposes, and hence is qualified to make application for the aged exemption. We have stated our concurrence with that opinion (1 Op.Counsel SBEA Nos. 34 and 59), in keeping with a series of judicial determinations to the effect that a holder of a legal life estate of real property has a freehold estate and is considered the owner thereof for assessment and taxation purposes. As indicated above this factual situation is clearly distinguishable.

Exemption statutes relieve certain classes of persons or property from paying their proportionate share of the total tax burden. Therefore, the courts have held that exemption statutes must be strictly construed against the taxpayer seeking such exemption (Herkimer County v. Village of Herkimer, 251 App. Div. 126, 295 N.Y.S. 629, aff’d, 279 N.Y. 560, 18 N.E.2d 854) . This means that a property owner or owners must comply with all the terms and conditions of the exemption statute in order to qualify thereunder. In this case it is our conclusion that all the conditions of section 467 have not been met.

December 17, 1974

NOTE:  Construes law prior to L.1995, Chapters 377, 378.