The Homestead Exemption

THE HOMESTEAD EXEMPTION 11/22/10

Most people are aware of the homestead exemption that allows seniors a tax break from some of their property tax. The Ohio Supreme Court has just issued a decision that will make this tax break easier to qualify for.

The Homestead exemption began back in 1971 and has expanded over the years with the biggest change in 2007 when the Ohio legislature eliminated the income restrictions to qualify. The Homestead exemption exempts the first $25,000 of your personal residence from property tax. The average savings for those who qualify is approximately $400 per year. To qualify for the homestead exemption the homeowner must satisfy the following rules

•· Be at least 65 years old or reach that age during the current tax year. Prior to 2008 there was an income limit. That was abolished so all senior qualify.

•· Be certified totally disabled regardless of age

•· Be the surviving spouse of a qualified homeowner who was at least 59 years old on the date of their spouse's death.

The Ohio Supreme Court just made the exemption easier to claim. Some counties were taking the position that if you used a trust to hold your home that in certain situations you would lose the homestead exemption. In this Ohio Supreme Court case a Mr. Oilman had set up a living trust and was the trustee of the trust which held his house. That was not a problem and the house could qualify for the homestead exemption. But when he died, the revocable trust became irrevocable. Even though the surviving spouse lived in the house and was the successor trustee and the beneficiary of the trust, Hamilton County held that she did not qualify for the homestead exemption because she had not set up the trust, her husband did. The Ohio Supreme court held that even after the trust that holds the house becomes irrevocable the surviving spouse can qualify for the homestead exemption if she is the trustee of the trust.

If however, the surviving spouse is not the trustee, it looks like she is out of luck and she doesn't qualify for the homestead exemption. For example sometimes a bank or the children are the trustees for older people. This could inadvertently cause the surviving spouse an extra $400 in property tax. However this is an easy problem to solve. Many times a trust is used to avoid probate. However, there are many ways to transfer your home without going through probate, such as a joint and survivor deed or the new transfer on death affidavit which allows you to name a beneficiary of your deed and avoid probate without a trust. If you qualify for the homestead exemption or will in a short period of time, you should make sure that your estate planning documents don't inadvertently cost you extra property taxes.

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