How does putting a life estate ownership interest into a trust affect taxable values or SEV?

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How does putting a life estate ownership interest into a trust affect taxable values or SEV?

My Mom put her property in a “Life Estate” under her name after my Dad died with my brother and his wife added as “Additional Owners”. My brother and his wife immediately changed their ownership to reflect a “Trust” in their name. By doing so, have they effectively avoided or become exempt from paying inheritance taxes on this property? Also, have they avoided any change in Taxable Value or SEV with this property? My parents owned the property for over 60 years so the Taxable Values are quite low. There are other siblings that were excluded from these ownership changes.

Asked on January 29, 2011 under Estate Planning, Michigan

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

These documents that you refer to need to be reviewed by an attorney.  Your brother could not have transferred the property in to a trust without your Mother's consent.  And it seems by the way that you have written this question that it was your Mother's wish to give your brother and his wife ownership after she dies. If that was not her intention then you need to speak with her immediately.  As for the tax issues, generally speaking irrevocable trusts help an estate to avoid paying taxes on the property listed in the estate.  If you think that you Mother was in any way unduly influenced by your Brother and his wife then you need to act quickly here.  Good luck.


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