Did placing a Washington home in a revocable trust end eligibility for the 1965 retired-owner tax exemption?

Plain-English summary

In 1967, the Washington Attorney General concluded that an otherwise eligible homeowner could still qualify for the retired-owner property tax exemption after placing the residence in the particular revocable trust described in the request. The trustee held bare legal title, while the trustor kept full equitable ownership, use of the home, responsibility for its expenses, and the power to revoke the trust and regain title.

The conclusion depended on those retained rights. The opinion distinguished its earlier conclusion in AGO 1967 No. 11 that a person holding only a life estate did not qualify under the same exemption law. The trustor here, the Attorney General reasoned, had not surrendered the ownership rights relevant to the exemption.

Currency note

This opinion was issued in 1967. 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.

Common questions

Did putting the residence in any trust automatically disqualify its owner?
No such general rule was announced. The Attorney General decided that the specific revocable trust submitted with the request preserved enough ownership for an otherwise qualified trustor.

Why did the trustor count as an owner when a life tenant did not?
The trustor retained full equitable title and could revoke the trust and recover the property. The earlier life-tenant opinion involved only a life estate.

Did the trustor have to keep paying the home's costs?
Under the trust agreement examined, the trustor retained responsibility for taxes, assessments, insurance, utilities, repairs, and other property expenses. The opinion counted this among the retained incidents of ownership.

Background and statutory framework

Subsection (3) of § 2, chapter 168, Laws of 1965, Ex. Sess., required ownership in fee or by contract purchase, subject to its residency alternative. The Attorney General read the submitted trust agreement as leaving the trustor in substantially the same position as a fee owner, though the trustee held legal title. The trust's revocation provision required a written instrument delivered at least three days before revocation became effective.

Citations and references

• Statute discussed: § 2, chapter 168, Laws of 1965, Ex. Sess.
• Related opinion: AGO 1967 No. 11.

Source

• Landing page: https://www.atg.wa.gov/ago-opinions/beneficiary-revocable-trust-tax-exemption-under-chapter-168-laws-1965-ex-sess

Original opinion text

Attorney General John J. O'Connell

TAXATION - EXEMPTION - ELIGIBILITY OF TRUSTOR - BENEFICIARY OF A REVOCABLE TRUST FOR TAX EXEMPTION UNDER CHAPTER 168, LAWS OF 1965, EX. SESS.

Where a property owner, who is otherwise qualified for the tax exemption under chapter 168, Laws of 1965, Ex. Sess., has conveyed his residence to a trustee under a revocable trust agreement which entitles the trustor (1) to have the full right to use of the property during his lifetime, and (2) to revoke the trust and retake complete ownership of the property at any time during his lifetime, such property owner can still qualify for the tax exemption.

March 28, 1967

Honorable Arthur R. Eggers
Prosecuting Attorney
Walla Walla County
407 Drumheller Building
Walla Walla, Washington 99362

Cite as: AGO 1967 No. 13

Dear Sir:

By letter previously acknowledged you have requested an opinion of this office on a question which we paraphrase as follows:

Where a property owner, who is otherwise qualified for the property tax exemption under chapter 168, Laws of 1965, Ex. Sess., has conveyed his residence to a trustee under a revocable trust agreement which entitles the trustor (1) to have the full right to use of the property during his lifetime, and (2) to revoke the trust and retake complete ownership of the property at any time during his lifetime, can such property owner still qualify for the tax exemption?

We answer your question in the affirmative for the reasons set forth in our analysis.

ANALYSIS

You have submitted with your request a copy of the trust agreement between certain property owners and the Upper Columbia Conference of the Seventh Day Adventist Church, and your [[Orig. Op. Page 2]] request has particular reference to this trust agreement. Among the provisions of the agreement are the following:

". . .

"2. Trustors shall have the full right to use the real property covered by this trust during their lifetime or the lifetime of the survivor, and shall enjoy all of the benefits and privileges of the same during that time except as otherwise required and reserved to the Trustee for the existence of this trust, which benefits as reserved in the Trustors shall include the right to use, occupy, lease, alter, improve, or repair said property, provided said Trustors shall pay any and all expenses incidental thereto, including taxes, assessments, insurance, utilities, costs of all repairs and alterations, and all other items of expense pertaining to said property.

". . .

"11. Except as may be otherwise provided, this Trust Agreement may be amended by an agreement in writing executed by the Trustors, or the survivor of them, and the Trustee. It may be revoked in the same way, or by an instrument executed, dated and delivered by the Trustors, or the survivor of them, at least three days before such revocation is to become effective." (Emphasis supplied)

We conclude that, under the terms of this trust agreement, the answer to your question is in the affirmative.

The key provision involved in your question is subsection (3) of § 2, chapter 168, Laws of 1965, Ex. Sess., which reads as follows:1/

[[Orig. Op. Page 3]]

"(3) The person claiming exemption shall have owned, either in fee or by contract purchase, the real property for which the exemption is claimed for at least five years or have been a resident of the state of Washington for at least ten years if not qualified under the five year ownership limitation;"

In AGO 1967 No. 11, copy enclosed, we concluded that a life tenant (i.e., one who holds only a life estate) in residential real property does not have a legally sufficient interest in the property to qualify for an exemption from the first fifty dollars of real property taxes due and payable as to such property. In thus concluding, we reasoned that on the basis of the language of subsection (3),supra, manifest legislative intent was that the tax exemption is to be available only to persons owning a fee interest (including contract purchases of a fee interest) in the particular residential real property.

Thus, the question now to be asked is whether a person who has placed his residence under a revocable trust such as above described can be considered as still owning it "either in fee or by contract purchase." We believe he can.

From an examination of the trust agreement, it would appear that the trustee holds only bare legal title to the property in question, and that full equitable title remains in the trustor; i.e., the original property owner. The trustor can withdraw the residence from the trust at any time, and retains the unconditional right to revoke the trust itself upon three days' written notice. Further, the trustor retains the obligation to pay any and all expenses connected with the residence, as would an ordinary fee owner, and retains all rights of use as are held by an ordinary fee owner.

As a practical matter, under the trust agreement the owner is in the same position with respect to his residence as he would be if he had simply provided in his will that his residence would be left to certain designated beneficiaries. In fact, he does not give up any rights of ownership at all. He holds the same interest as a fee owner or contract purchaser, the only difference being that his interest is equitable only.

Accordingly, we conclude that such a person is entitled to the exemption.

[[Orig. Op. Page 4]]

We trust that the foregoing will be of assistance to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

TIMOTHY R. MALONE
Assistant Attorney General

*** FOOTNOTES ***

1/This statute, as you are aware, generally relates to the qualification of certain elderly and retired owners of real property for a limited tax exemption, and was enacted by the legislature in implementation of Amendment 47 to our state constitution which, as H.J.R. No. 7, was adopted by the voters at the 1966 general election.