If a Virginia homeowner puts their house in a trust, can they still claim the senior, disability, or disabled-veteran property tax exemption?

Plain-English summary

This opinion answered a common estate-planning trap that hits seniors and disabled veterans hard: putting your home into a revocable living trust to avoid probate can disqualify you from substantial property tax relief.

Three local tax officials (Newport News, Loudoun, Albemarle) asked the AG whether Virginia's age, disability, and disabled-veteran property tax exemptions still applied when the home was held in a trust, or held in a life estate.

The AG drew a clear line: trust no, life estate yes.

Why a trust disqualifies. Article X, § 6(b) of the Virginia Constitution authorizes the General Assembly to let localities exempt real estate "owned by, and occupied as the sole dwelling of" persons 65 or older or permanently and totally disabled. Article X, § 6-A is the parallel for totally disabled veterans (effective for tax years on or after January 1, 2011). Both turn on "owned by."

When property goes into a trust, the trust (acting through its trustee) holds legal title. The grantor or beneficiary may have equitable rights, but the legal owner is the trust. Under Austin v. City of Alexandria (2003), a grantor who conveys title to a trust transfers "the complete title in the property to himself as trustee" and afterward holds no legal title in his individual capacity. This matters because Article X, § 6(f) commands that "[e]xemptions of property from taxation ... shall be strictly construed." The Virginia Supreme Court applies the maxim: "where there is any doubt, the doubt is resolved against the one claiming exemption."

The 1969 constitutional debates that produced § 6(b) explicitly considered whether trust-held property should qualify. Delegate Morrison, presenting the proposal on behalf of the Finance Committee, said: "If there is no deed of ownership held by the person occupying the property, I would say he would not qualify." That intent was carried forward when "permanently and totally disabled" persons were added by 1976 amendment.

The opinion notes a wrinkle: in 2012 the General Assembly tried to extend the § 6-A veteran exemption to trust-held property by statute (2012 Va. Acts chs. 75, 263). The AG flagged that any legal challenge would test whether the legislature can do that without a constitutional amendment, citing Southern Ry. Co. v. City of Richmond (1940) for the proposition that the General Assembly cannot authorize tax assessments that conflict with a constitutional limit.

Why a life estate qualifies. A life estate is a freehold estate. The life tenant has present possession, present control, and statutory duties of ownership including the duty to pay taxes. The Virginia Supreme Court has consistently treated the life tenant as the "owner" for tax purposes: "who has the usufruct, control or occupation of the land, whether his interest in it is an absolute fee, or an estate less than a fee" (Banks, McKenny, Ceroli, Stark, Wilson).

Section 58.1-3215(A) is consistent: the exemption goes to "the qualifying individual occupying such dwelling and owning title or partial title thereto." The AG treats a life tenant as holding the requisite partial title. So a senior, a disabled person, or a totally disabled veteran who occupies their home under a life estate keeps the exemption. A remainderman, by contrast, does not have present control and does not qualify (a 1976-77 prior opinion).

Currency note

This opinion was issued in 2013. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

In particular, the 2012 amendment that attempted to extend the § 6-A veteran exemption to trust-held property remained legally untested as of the date of this opinion, and the AG flagged its constitutional vulnerability. Subsequent legislative or judicial activity may have resolved that question. Anyone considering an estate-planning move that puts a Virginia home in trust should verify the current state of the exemption rules before relying on either side of this distinction.

Common questions

I want to avoid probate but I'm 70 and getting the senior tax exemption. What are my options?
At the time of this opinion, a revocable living trust would have cost the senior exemption. Life estates, by contrast, preserved it. Some seniors used "enhanced life estate" or "Lady Bird" deeds (where Virginia recognizes them) to get probate-avoidance benefits without losing the exemption. Anyone facing this trade-off today should check with a current Virginia estate-planning attorney.

Is a disabled veteran's exemption the same as the senior exemption?
They are parallel but separate constitutional provisions. Section 6(b) authorizes localities to exempt for age 65+ or permanently/totally disabled. Section 6-A mandates exemption (statewide) for veterans rated 100% service-connected permanently and totally disabled. Both turn on "owned by" and both have life-estate rules; trusts are problematic for both, though the General Assembly tried to fix this for veterans in 2012.

What about a joint trust between spouses?
The opinion does not address spousal trusts specifically. The strict-construction rule and the Austin holding suggest the analysis is the same: if the trust holds title, the spouse holding equitable interest is not the legal owner. Consult a Virginia attorney.

What about a trust where the qualifying person is both trustee and beneficiary?
The opinion addresses this in a footnote: it still does not qualify. As trustee, the person holds title in a representative capacity, not individually. As beneficiary, the person holds equitable interest, not legal title.

Does a remainderman qualify?
No. The 1976-77 AG opinion cited here concluded that a remainderman, while holding "partial title," lacks present control and does not qualify as an "owner" for the exemption.

What if title is held jointly by qualifying and non-qualifying individuals?
A separate 2007 AG opinion cited here concluded that jointly-held property between qualifying and non-qualifying owners is not exempt under § 58.1-3210. The General Assembly later addressed some of these gaps with proportional or partial exemption rules; verify current law.

Can a locality choose to exempt trust-held property anyway?
No. The constitutional "owned by" requirement constrains localities; they cannot grant an exemption broader than the Constitution authorizes.

How is "permanently and totally disabled" defined?
Section 58.1-3217 contains the definition for § 6(b) purposes. For the § 6-A veteran exemption, the standard is a Veterans Affairs determination of 100% service-connected permanent and total disability.

Background and statutory framework

• Va. Const. art. X, § 1: general rule that all property is taxed.
• Va. Const. art. X, § 6(b): authorization for localities to exempt real estate of persons 65+ or permanently/totally disabled.
• Va. Const. art. X, § 6-A: mandatory state exemption for veterans rated 100% service-connected permanently and totally disabled.
• Va. Const. art. X, § 6(f): rule that all property tax exemptions are strictly construed.
• Va. Code § 58.1-3210: implementing statute for § 6(b) (local option).
• Va. Code § 58.1-3219.5: implementing statute for § 6-A (statewide).
• Va. Code § 58.1-3215(A): exemption goes to the qualifying individual "owning title or partial title."
• Va. Code § 58.1-3015: tax treatment of trust-held property (taxed to the trustee or, in some cases, the beneficiary).
• Va. Code § 58.1-1: Title 58.1 definition of "taxpayer."
• Va. Code § 58.1-3281: owner of record on January 1 is assessed for the year.

The interpretive moves:

• "Owned by" in the Constitution requires legal title in the qualifying person.
• A trust splits legal title (trustee) from equitable interest (beneficiary); legal title is not in the qualifying individual.
• A life estate is a freehold; the life tenant has present possession and tax duties, satisfying the "ownership" requirement.
• Strict construction rule resolves any doubt against the claimed exemption.
• Legislative attempt to extend § 6-A by statute (2012) was flagged as constitutionally questionable.

Citations

• Va. Const. art. X, §§ 1, 6, 6-A
• Va. Code § 58.1-3210
• Va. Code § 58.1-3215
• Va. Code § 58.1-3219.5
• Va. Code § 58.1-3015
• Austin v. City of Alexandria, 265 Va. 89, 574 S.E.2d 289 (2003)
• Commonwealth v. Wellmore Coal Corp., 228 Va. 149, 320 S.E.2d 509 (1984)
• Golden Skillet Corp. v. Commonwealth, 214 Va. 276, 199 S.E.2d 511 (1973)
• Banks v. County of Norfolk, 191 Va. 463, 62 S.E.2d 46 (1950)
• City of Richmond v. McKenny, 194 Va. 427, 73 S.E.2d 414 (1952)
• 2011 Op. Va. Att'y Gen. 171
• 2007 Op. Va. Att'y Gen. 129
• 2012 Op. Va. Att'y Gen. 134
• 1971-72 Op. Va. Att'y Gen. 427
• 1999 Op. Va. Att'y Gen. 205
• 1976-77 Op. Va. Att'y Gen. 293

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2013/13-070_Wertz_et_al.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Kenneth T. Cuccinelli, II
Attorney General

900 East Main Street
Richmond, Virginia 23219
804-786-2071
FAX 804-786-1991
Virginia Relay Services
800-828-1120
7-1-1

December 27, 2013

The Honorable Priscilla S. Bele
Commissioner of the Revenue, City of Newport News
City Hall
2400 Washington Avenue
Newport News, Virginia 23607

The Honorable Robert S. Wertz, Jr.
Commissioner of the Revenue, Loudoun County
Post Office Box 8000
Leesburg, Virginia 20177

Larry W. Davis, Esquire
County Attorney for Albemarle County
401 McIntire Road, Suite 325
Charlottesville, Virginia 22902

Dear Ms. Bele and Messrs. Wertz and Davis:

I am responding to your requests for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issues Presented

You ask several questions relating to the exemption from, or deferral of, local real property taxes when title to the property is held in trust or in a life estate. You first ask whether the property tax exemption or deferral for persons not less than 65 years of age or disabled authorized in Article X, § 6(b) of the Constitution of Virginia extends to a person who has chosen to place title to the real property in any form of trust or holds property in a life estate. You also ask whether the property tax exemption for disabled veterans provided in Article X, § 6-A of the Constitution of Virginia extends to a veteran who has chosen to place title to the real property in a life estate.

Response

It is my opinion that the exemption from, or deferral of, real property taxes authorized in Article X, § 6(b) for persons not less than 65 years of age or disabled does not extend to a person who has placed title to the real property in any form of trust, but does extend to a person who otherwise qualifies for the exemption and who holds a life estate in the real property. It is further my opinion that the exemption for disabled veterans provided in Article X, § 6-A does extend to a qualifying veteran who holds a life estate in the real property.

Applicable Law and Discussion

Article X, § 1 of the Constitution of Virginia provides that "[a]ll property, except as hereinafter provided, shall be taxed." Article X, § 6 authorizes limited exemptions from taxation. Included within such exemptions, Article X, § 6(b) empowers the General Assembly to authorize specified age or disability based exemptions:

The General Assembly may by general law authorize the governing body of any county, city, town, ... to provide for the exemption from local property taxation, or a portion thereof, within such restrictions and upon such conditions as may be prescribed, of real estate and personal property designed for continuous habitation owned by, and occupied as the sole dwelling of, persons not less than sixty-five years of age or persons permanently and totally disabled as established by general law. A local governing body may be authorized to establish either income or financial worth limitations, or both, in order to qualify for such relief.

Additionally, effective for tax years beginning on or after January 1, 2011, Article X, § 6-A mandates a local real property tax exemption for totally disabled veterans. That section provides, in relevant part:

Notwithstanding the provisions of Section 6, the General Assembly by general law, and within the restrictions and conditions prescribed therein, shall exempt from taxation the real property, including the joint real property of husband and wife, of any veteran who has been determined by the United States Department of Veterans Affairs ... to have a one hundred percent service-connected, permanent, and total disability, and who occupies the real property as his or her principal place of residence.

Pursuant to Article X, § 6(f) these and any other "[e]xemptions of property from taxation as established or authorized hereby shall be strictly construed."

The General Assembly enacted § 58.1-3210 to authorize local governing bodies to provide for the exemption set forth in Article X, § 6(b). Section 58.1-3210(A) provides in relevant part that

The governing body of any county, city or town may, by ordinance, provide for the exemption from, deferral of, or a combination program of exemptions from and deferrals of taxation of real estate and manufactured homes as defined in § 36-85.3, or any portion thereof, and upon such conditions and in such amount as the ordinance may prescribe. Such real estate shall be owned by, and be occupied as the sole dwelling of anyone at least 65 years of age or if provided in the ordinance, anyone found to be permanently and totally disabled as defined in § 58.1-3217.[1]

The General Assembly implemented the exemption authorized in Article X, § 6-A through the enactment of § 58.1-3219.5, which provides in relevant part as follows:

Pursuant to Article X, Section 6-A of the Constitution of Virginia, and for tax years beginning on or after January 1, 2011, the General Assembly hereby exempts from taxation the real property, including joint real property of husband and wife, of any veteran who has been rated by the U.S. Department of Veterans Affairs ... to have a 100 percent service-connected, permanent, and total disability, and who occupies the real property as his principal place of residence.[2]

Sections 58.1-3213 and 58.1-3219.6 contain the statutory requirements for the application process for claiming the respective exemptions.

During the 1969 debates in the General Assembly pertaining to the revision the Constitution of Virginia, some members expressed confusion regarding the meaning of the phrase "owned by" as used in the property tax exemption for certain persons not less than 65 years of age to be authorized in proposed Article X, § 6(b).[3] In presenting the proposed § 6(b) to the House of Delegates on behalf of the Finance Committee, Delegate Theodore V. Morrison, Jr. indicated that the tax exemption would not be available for real property held in trust rather than owned directly by the person who in other respects qualifies for the exemption.[4]

Several prior opinions of this Office are relevant to the exemption qualification issues you raise.[5] In particular, a 2007 Opinion notes that the phrase "owned by" contained in § 58.1-3210 is not subject to an exact definition.[6] That Opinion explains that the facts of each exemption request must be carefully analyzed to determine whether the real estate involved actually is owned by a qualifying individual or individuals.[7] Furthermore, a 2011 Opinion addresses a number of questions regarding Article X, § 6-A and concludes, in part, that the property tax exemption authorized by that constitutional provision is not available for a property held in trust for an otherwise qualifying disabled veteran.[8] The rationale for that conclusion, which follows below, yields the same result when the question is whether property held in trust is eligible for the exemption authorized by Article X, § 6(b) and § 58.1-3210.

In Title 58.1 of the Code, "taxpayer" is defined as "every person, corporation, partnership, organization, trust or estate subject to taxation under the laws of this Commonwealth, or under the ordinances, resolutions or orders of any county, city, town or other political subdivision of this Commonwealth."[9] By statute, January 1 is the beginning of the tax year for the assessment of taxes on real estate, "and the owner of real estate on that day shall be assessed for the taxes for the year beginning on that day."[10] The Code provides that "[i]f property is owned by a person sui juris, it shall be taxed to him ... [;] [i]f the property is held in trust for the benefit of another, it shall be listed by and taxed to the trustee, if there is any in this Commonwealth, and if there is no trustee in this Commonwealth, it shall be listed by and taxed to the beneficiary."[11]

The Supreme Court of Virginia has discussed the importance of adhering to the constitutionally mandated rule of strict construction in applying exemptions:

The Constitution of Virginia, as revised in 1971, provides that "[e]xemptions of property from taxation ... shall be strictly construed." This rule of strict construction stems from the Commonwealth's announced policy "to distribute the tax burden uniformly and upon all property." Therefore, statutes granting tax exemptions are construed strictly against the taxpayer, and "[w]hen a tax statute is susceptible of two constructions, one granting an exemption and the other not granting it, courts adopt the construction which denies the exemption." Indeed, "where there is any doubt, the doubt is resolved against the one claiming exemption," and "to doubt an exemption is to deny it."[12]

Pursuant to the express terms of Article X, § 6(b) and § 58.1-3210, eligibility for the tax exemption or deferral authorized by those provisions requires the subject property to be "owned by" the person who occupies it as his or her sole dwelling and who otherwise qualifies for the exemption by reason of age or disability. When title to real property is held by a trust, the incidents of ownership are with the trust and the trustee rather than the grantor or the beneficiary.[13] Thus, if real property is held in trust, an otherwise qualifying individual not less than 65 years of age or disabled will not meet the ownership requirement of Article X, § 6(b) and § 58.1-3210.[14]

You also ask whether property that is held in a life estate can qualify for the exemption or deferral authorized in Article X, § 6(b). A prior opinion of this Office addressing this question concludes that a life tenant with a life estate in the subject property may qualify as the owner of the property for purposes of the tax exemption.[15] At common law, a life estate in land is a freehold estate of indeterminate duration, not held at the will of another, which terminates upon the death of the life tenant or another living person.[16] Although not possessed of the fee simple estate, a life tenant still has possession of the freehold with responsibilities of property ownership, including the duty to pay taxes.[17] The Supreme Court of Virginia, for purposes of determining who is the "owner" of real property properly responsible for paying taxes levied on the property, asks "who has the usufruct, control or occupation of the land, whether his interest in it is an absolute fee, or an estate less than a fee."[18] In circumstances where the property is subject to a life estate, the court has consistently found that the life tenant, having sufficient present control over the property, is the "owner" of the property for tax purposes.[19]

Consistent with these precedents, a life tenant meets the ownership requirement for the exemption or deferral of taxes pursuant to Article X, § 6(b) and § 58.1-3210 and may be eligible for the grant of the same provided for in § 58.1-3215(A) to "the qualifying individual occupying such dwelling and owning title or partial title thereto."[20] For the same reasons, I also conclude that a veteran who possesses a life estate in his or her principal place of residence meets the ownership requirement for the exemption authorized in Article X, § 6-A and § 58.1-3219.5.

Conclusion

Accordingly, it is my opinion that the exemption from, or deferral of, real property taxes for persons not less than 65 years of age or disabled authorized in Article X, § 6(b) of the Constitution of Virginia does not extend to a person who has placed title to the real property in any form of trust. It is further my opinion that the exemption or deferral authorized in Article X, § 6(b) does extend to a person who otherwise qualifies for the exemption and who holds a life estate in the real property. Finally, it is my opinion that the exemption for disabled veterans authorized in Article X, § 6-A of the Constitution of Virginia does extend to a qualifying veteran who holds a life estate in the real property.

With kindest regards, I am

Kenneth T. Cuccinelli, II
Attorney General

[1] VA. CODE ANN. § 58.1-3210(A) (2013).

[2] Section 58.1-3219.5(A) (2013).

[3] See PROCEEDINGS AND DEBATES OF THE SENATE OF VIRGINIA PERTAINING TO AMENDMENT OF THE CONSTITUTION 157 (Ex. Sess. 1969). See also 2 A.E. DICK HOWARD, COMMENTARIES ON THE CONSTITUTION OF VIRGINIA 1085 n.67 (1974). On November 2, 1976, the voters ratified an amendment to Article X, § 6(b), submitted to them by the General Assembly, to extend the authorized tax exemption to "persons permanently and totally disabled." See 1976 Va. Acts chs. 751, 782.

[4] The House of Delegates debates in 1969 included the following exchange between Delegate M. Caldwell Butler (R-Roanoke) and Delegate Theodore V. Morrison, Jr. (D-Newport News) regarding proposed Article X, § 6(b):

MR. BUTLER: With reference to the same problem, frequently elderly people will occupy residences that are held in trust for their benefit, together with a modest amount of income-producing security. Is it your understanding that they would be owners within the meaning of this provision and, therefore, be entitled to the exemption?

MR. MORRISON: If there is no deed of ownership held by the person occupying the property, I would say he would not qualify.

PROCEEDINGS AND DEBATES OF THE VIRGINIA HOUSE OF DELEGATES PERTAINING TO AMENDMENT OF THE CONSTITUTION 358 (Ex. Sess. 1969).

[5] See 2011 Op. Va. Att'y Gen. 171, 182-84 (tax exemption authorized by Article X, § 6-A is not available for property held in trust, the beneficiary of which is an otherwise qualifying disabled veteran); 2007 Op. Va. Att'y Gen. 129, 132 (property owned jointly by qualifying and non-qualifying individuals is not exempt under § 58.1-3210); 2012 Op. Va. Att'y Gen. 134, 136 (exemption under Article X, § 6-A does not apply in favor of a veteran who is a proprietary lessee in a real estate cooperative); and 1999 Op. Va. Att'y Gen. 205, 206 (exemption under § 58.1-3210 is not available for proprietary lessee when real estate cooperative association owns property).

[6] 2007 Op. Va. Att'y Gen. at 131.

[7] Id. at 131-32.

[8] 2011 Op. Va. Att'y Gen. at 183. In 2012, the General Assembly sought by statute to extend to properties held in trust the exemption authorized by Article X, § 6-A. 2012 Va. Acts chs. 75, 263. Upon any legal challenge, it remains to be seen whether the courts will agree that the legislature has the authority to make such a change to this tax exemption without seeking voter approval of an amendment to Article X, § 6-A of the Virginia Constitution. See, e.g., Southern Ry. Co. v. City of Richmond, 175 Va. 308, 318-19, 8 S.E.2d 271, 275 (1940) (General Assembly can neither authorize nor ratify a local tax assessment made in conflict with a limitation set forth in the Constitution of Virginia).

[9] Section 58.1-1 (2013) (emphasis added).

[10] Section 58.1-3281 (2013).

[11] Section 58.1-3015 (2013).

[12] Commonwealth v. Wellmore Coal Corp., 228 Va. 149, 153-54, 320 S.E.2d 509, 511 (1984) (alteration in original) (internal citations omitted).

[13] See, e.g., Austin v. City of Alexandria, 265 Va. 89, 95-97, 574 S.E.2d 289, 292-93 (2003) (when grantor conveyed title to property to a trust, grantor transferred the complete title in the property to himself as trustee and thereafter had no legal title in the property to convey in his individual capacity); Air Power, Inc. v. Thompson, 244 Va. 534, 537-38, 422 S.E.2d 768, 770 (1992) (beneficiary is not a necessary party in a suit to enforce a mechanic's lien, because a beneficiary in a land trust retains no interest, legal or equitable, in the property itself).

[14] This conclusion does not change in a circumstance where the otherwise qualifying individual also is (i) the trustee holding title to the subject property for a trust and (ii) a beneficiary of the trust. Exemptions of property from taxation must be strictly construed; "'where there is any doubt, the doubt is resolved against the one claiming exemption.'" Wellmore Coal Corp., 228 Va. at 154, 320 S.E.2d at 511 (quoting Golden Skillet Corp. v. Commonwealth, 214 Va. 276, 278, 199 S.E.2d 511, 513 (1973)). A person who holds title to real property as a trustee does not have legal title to the same in his individual capacity. Austin, 265 Va. at 95-97, 574 S.E.2d at 292-93. The text of Article X, § 6(b) makes no reference to trusts in setting forth the specific requirement that the property be "owned by" the otherwise qualifying individual. This is no mere oversight as the 1969 debates on the Constitution of Virginia specifically considered whether trust-owned property should be eligible for the exemption to be authorized by the proposed Article X, § 6(b). See supra note 4 and accompanying text.

[15] See 1971-72 Op. Va. Att'y Gen. 427, 428.

[16] See 1 RALEIGH COLSTON MINOR, THE LAW OF REAL PROPERTY § 135 (the freehold) ("The common law recognized no interest in land to be 'real property' unless it were a freehold, and no one as the actual owner of land unless he were a tenant of the freehold." (emphasis in original)), and § 191 (general nature of life estates) (F.D.G. Ribble 2d ed. 1928).

[17] Id. at §§ 136 (seisin), 143 (classification of estates of freehold and estates less than freehold), 157 (incidents of fee simple ownership), 215 (life tenant's duty to pay taxes and local assessments).

[18] See Banks v. County of Norfolk, 191 Va. 463, 467, 62 S.E.2d 46, 48 (1950), quoting Powers v. City of Richmond, 122 Va. 328, 335, 94 S.E. 803, 805 (1918).

[19] See City of Richmond v. McKenny, 194 Va. 427, 430, 73 S.E.2d 414, 416 (1952); Ceroli v. City of Clifton Forge, 192 Va. 118, 125-26, 63 S.E.2d 781, 785 (1951); Banks, 191 Va. at 467, 62 S.E.2d at 47-48; Stark v. City of Norfolk, 183 Va. 282, 289, 32 S.E.2d 59, 61-62 (1944); Commonwealth v. Wilson, 141 Va. 116, 121, 126 S.E. 220, 222 (1925).

[20] Section 58.1-3215(A) (2013) (emphasis added). Because your inquiry does not ask about the eligibility of a remainderman, I do not herein address the issue. See 1976-77 Op. Va. Att'y Gen. 293, 294 ("As the holder of a life estate, the life tenant was the owner of 'partial title,' for purposes of the exemption .... Conversely, due to lack of control over the property, the remainderman, while also holding 'partial title,' would not be considered an 'owner.'").