A revocable living trust allows the maker of the trust (Settlor) to make changes to the trust during his or her lifetime. A revocable trust usually directs the trustee to pay all income to the Settlor for life and pay the trust assets to the main person after the Settlor’s death. Revocable living trusts often avoid a lengthy probate process but they don’t necessarily shelter assets from federal or state taxes.
If you have a revocable living trust which holds title to your home, care must be taken to check with your county tax department to make sure you are receiving homestead tax classification. Some counties require a separate homestead application to be filed when the land is held by a trust. If you fail to file the required application, your property may be taxed as non-homestead, which is often at a higher tax rate. Further, if you have farmland and lose the homestead classification, you may lose a significant estate tax benefit potentially worth several hundred thousand dollars.
If you have questions about revocable trusts, homestead classification, or any estate planning or tax issues, please contact Steve Fink at 507-625-2525.
This webpage contains general information and not legal advice. It is based on Minnesota law in effect at the time of writing. An attorney at Farrish Johnson can advise you about how the law applies to your specific situation.