OAG 94-23

March 31, 1994

Karen M. Campbell

Middleton & Reutlinger

2500 Brown & Williamson Tower

Louisville, Kentucky 40202-3410

Re: Real Estate Tax

Dear Ms. Campbell:

You have asked the following question:

This firm represents an individual who desires to transfer real property owned by him individually to a revocable living trust of which he is the trustee. The sole beneficiaries of the trust are himself for life with remainder to his wife and children. Are the exemptions at subsections 7(e) and 7(l) [of KRS 142.050] available under these facts?

The transfer you describe would not be exempt from tax.

The real estate transfer tax is imposed on “the privilege of transferring title to real property.” KRS 142.050(2). Any transfer of real property is subject to the tax unless the transfer falls within one of the enumerated exceptions listed in KRS 142.050(7).

We said in OAG 83-43 that a transfer to a revocable trust for the benefit of the grantor is subject to the tax, even though the trustee is the grantor himself. We pointed out in that opinion that if the conveyance were “by a parent in trust for the sole and exclusive benefit of the children” then it would fall within the exemption for transfers between parent and child. KRS 142.050(7)(l). The same result would be reached if the transfer were to a spouse, for such transfers are also exempt. KRS 142.050(7)(e).

In the situation you have described, the grantor is the beneficiary of a life estate in the property, and his wife and children are beneficiaries of the remainder interest. The transfer is not “for the sole and exclusive benefit” of the children and spouse, and therefore is not exempt from the transfer tax.

You may wish to structure the transfer in such a way that the grantor's life estate is not transferred to the trust. The only feature of the transaction that makes it subject to tax is the transfer of the life estate from the grantor individually to himself as trustee. Without that transfer, the transaction would not be taxable.


Chris Gorman

Attorney General

Ross T. Carter

Assistant Attorney General