Cottage Transfers of Ownership without Uncapping Property Tax Broadened Under Michigan House Bill

more+
less-

On December 27, 2012, HR-4753 was signed into law by Michigan Gov. Rick Snyder. As discussed in our previous blog post, "HR-4753: An Early Christmas Gift for Michigan Cottage Owners!", this law prevents the uncapping of property taxes on certain transfers of residential property between individuals related by blood or affinity to the first degree. Although this law is regarded as a win for cottage owners, there is significant concerns related to the law.

The current law excludes a transfer to grandparents as being protected from an uncapping of the property taxes. In addition, the Michigan State Tax Commission has interpreted the current law to require that both a transferor and transferee be a person. Therefore, the uncapping exemption would not apply to transfers of property from a trust, a limited liability company, or a probate estate.

On May 8, 2014, House Representative Peter Pettalia introduced House Bill 5552 to address the above concerns (or most of them). HB 5552 was passed by the House of Representatives on June 5, 2014, and is currently being reviewed by the Senate. 

First, HB 5552 eliminates the requirement that individuals be related by blood or affinity to the first degree and instead specifies that a transfer of residential real property between the transferor or the transferor's spouse and the following individuals will not result in an uncapping of the property taxes:

  • Mother
  • Father
  • Brother
  • Sister
  • Child
  • Stepparent
  • Stepchild
  • Stepbrother
  • Stepsister
  • Grandparent
  • Step-grandparent
  • Grandchild
  • Step-grandchild
  • Son-in-law
  • Daughter-in-law
  • Legal ward

Second, HB 5552 exempts residential properties transferred from a trust or by inheritance under a will to individuals related to the settlor or decedent as described above from an uncapping of the property taxes. The bill does not, however, exempt residential properties transfer from a limited liability company. 

Both of the proposed amendments to the law, the expanded definition of transferee to include grandparents and step-grandparents and the expanded definition of transferor to include trusts and an inheritance under a will, are important changes to the law for cottage owners.

 

Topics:  Estate Planning, Property Tax, Real Estate Transfers, Transfer of Title

Published In: Residential Real Estate Updates, Tax Updates, Wills, Trusts, & Estate Planning Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Varnum LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »