STAR Rebate with an Irrevocable Trust

July 28, 2022
Dear Clients and Friends:
This one gets me annoyed….read on:
CLIENT QUESTION:
In NYS a property tax rebate is being mailed to homeowners. If one’s house is in an irrevocable trust, will the one who pays the yearly taxes and also lives in the house be given a rebate?
MY RESPONSE:
Many of you know that instead of paying less in property taxes due to the STAR program, you are now paying more and then receiving a rebate in the mail. Why couldn’t they have left a good thing alone? If you own your house then it is business as usual. However, if your house is in an irrevocable Medicaid trust then things can get more complicated…although they shouldn’t…and that is why I am annoyed.
The way we set up these trusts is that you remain responsible for the property taxes, even though the house is owned by the trust.  We do this for the very reason that you retain your STAR exemption.  As such, the rebate should be paid to you and not the trust. However, what we are seeing is that the rebate is being paid to the trust. The towns are not reading the trust, all they see is that the trust is the owner. Now what? How do we get that check out of the trust and paid to you? Well, this is not so easy. The thing that you cannot do is have the trust write you a check for the amount of the rebate. You should be able to because it is not the trust’s money, it is yours. Nevertheless, I do not want to have to explain this to Medicaid later. DO NOT DO IT!
One thing you could try is to have the trust return the check to the town with instructions to reissue the check to you directly. Sounds reasonable, but I do not know if you will ever see that money again as it gets lost in the bureaucracy. Instead of mailing it, perhaps walk into the town offices and talk to a human being. I am skeptical of the results.
You could also have the trust pay the money out to the trust beneficiaries (probably your children) and they can do what they want with it, like buy a plane ticket to Maui for themselves or give it to you if they want. It would be up to them.
Many of our clients are simply having the trust retain the money in the trust and chalk it up to more for the kids later.
I have problems with all of these solutions.
I remain annoyed.
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Until next time,
peace, health, and happiness,
Lawrence Eric Davidow