V.I. must protect our right to use revocable trusts
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The phone call from Director of Motor Vehicles Jerris Browne was a welcome surprise. He was following up on my complaint about being denied the senior discount by the cashier at motor vehicles, which had told me that the discount did not apply because my car was registered in my revocable family trust.
Over the years, I have had several vehicles registered in my trust and had always been given the senior discount, so I asked to speak to the director. Now, he was calling to ask why the discount should apply in the case of a revocable trust.
I explained that holding title to the vehicle in the trust does not mean that the person does not own the vehicle, it just permits a person's heirs to avoid probate when the owner dies. Assets such as real estate, vehicles, bank accounts, etc., in a trust continue to be managed by the owner, as trustee. But when the owner dies, the successor trustee, named in the trust, only needs to provide a copy of the trust, a death certificate and an affidavit in order to manage, sell or transfer the assets to the person's heirs, as provided in the trust document, just as the executor of a will could sell or transfer property after probate.
The difference is that the successor trustee can act immediately after the owner's death without the need to hire an attorney to go to court and wait for a court order, which can take years and prohibitive cost. The delay and cost of probate can be totally avoided by use of a trust.
Shortly thereafter, director Browne phoned again to say that seniors owning vehicles in revocable trusts would indeed be given the senior discount. This welcome response encourages me to speak out regarding another issue involving revocable trusts. The Recorder of Deeds has begun assessing a stamp tax - 2 percent or more of the value of the property - on deeds into and out of trusts. The reason for the change is a 2013 Opinion of the V.I. Attorney General that states that the stamp tax should be assessed on such transfers. This opinion directly contradicts a 2001 Opinion that held that no stamp tax should be assessed.
As a consequence of this ill-advised new Opinion, it will be far more costly for anyone to move their property into a trust. Even worse, real property in trusts will again be assessed a stamp tax when the property is transferred out of the trust - even when the transferee is a relative who would otherwise be exempt from this tax.
According to the Virgin Islands Code, a stamp tax "is imposed on the transfer of title to:
(1) Real property by instrument of conveyanceâ¦" 33 VIC Section 121. As stated in the 2001 opinion, "A Living Revocable Trust is an estate planning device which allows a person to decide what will happen with his property if he is disabled or dies without having to go through probate."
A deed from a husband and wife to themselves, as trustees of a revocable trust, is not a "transfer of title" since the title is not transferred. A deed from individuals to themselves as trustees merely changes the form in which they continue to own the real property. Nor is such a deed "an instrument of conveyance" since the real property is not being conveyed to anyone else.
A deed to a trust changes the form of ownership, not the owner, in the same way a deed from owners as "tenants in common" to themselves as "tenants by the entirety" changes the form of ownership. If a man and woman take title to property as "tenants in common" and then marry and record a deed to themselves as "tenants by the entirety," that deed requires no stamp taxes. They have only changed the form of their ownership, not transferred title or made a conveyance.
A deed from individuals to themselves, as trustees of a revocable trust, only changes what happens when the owners die. The trust permits the successor trustee to transfer and convey the real property as directed by the trust.
Stamp taxes clearly should not be assessed on a deed from individuals to themselves as trustees or on deeds from a trust to family members who clearly have the exemption. I am unaware of any state that charges transfer taxes on trust deeds, and I know that there is no such tax in California, New York, Florida, Texas or Washington DC.
Hopefully this new policy of assessing stamp taxes on deeds to and from trusts will be quickly reversed, by new legislation if necessary, so that Virgin Islanders will again be able to use trusts to transfer their real property to their heirs without the need for probate.
- John Stryker, St. Thomas