We DO NOT provide any legal advice. The forms and legal information are provided for you to bring to an attorney as a basis for discussion and with the possibility of reducing your legal fees. The forms and information are provided AS IS, without warranty.
Suggestion for Your Church
One of the reasons we provide the forms and information in this section is to demonstrate our competence. If you see that we have some competence in this area, perhaps you will recognize that we have it in some others. We recommend that you investigate the free self help tools at ClosenessInLove.com, LoversInTraining.org, and InnerPeace.org and encourage your church members to establish support groups using these tools.
Will these forms work in all states?
The concept should work in all states, but the forms have not been verified for all states. Be sure to confirm the witness and notary requirements in your states. While all states require a notary for publicly recorded documents, the wording of the notary section (the jurat) varies from state to state. Some states also require one witness to certain documents, some require two, and others do not require any. Some states allow the notary to sign as both a witness and the notary, while others do not.
Also, different states have different formatting rules. Even though your local recorder or clerk cannot give you legal advice, they can tell you the formatting rules. To be sure, use 1 1/2 inch margins all around, leave the top three inches blank on the first page, and you should be fine.
Will these forms work in other countries besides the U.S.?
We have no idea. Check with a local attorney.
What if we want to change something in the trust after we create it?
By definition, a revocable trust is also amendable.
Why is there no language stating that the trust is revocable?
Unless expressly stated as irrevocable, a trust is revocable.
If the trust is revocable, why does it contain perpetual and termination language?
If not revoked, the trust continues until it is terminated.
Why do you use a quitclaim deed?
If you still owe a mortgage, taxes, and maybe other things on the property, a quitclaim passes title as is. If your attorney prefers, you can use a warranty deed.
Will we have to pay a transfer tax when we file the deed?
Because the transfer is a gift, there is no transfer tax, only the recording fees, which are usually based upon the number of pages filed.
How is the deed revocable?
The deed says that the property is given under the terms of the trust. The terms of the trust are that it is revocable. When the trust is revoked, the trustees will simply quitclaim the property back to the Grantors or to the estate of the last surviving Grantor.
What if we want to leave the property to the church?
Just say so in your will, but still use the revocation form. It is designed to prevent tax consequences when one spouse outlives the other, which is most often the case. Otherwise, half the ownership of the property would be in an irrevocable trust upon the death of the first deceasing spouse (the right to revoke ceases upon death), and the surviving spouse would then have to pay self-employment tax on half the rental value of the property.
Will putting our house into a trust trigger a due on sale clause in our mortgage?
12 U.S.C. § 1701j–3(d)(8) specifically prohibits this in all 50 states.
How long does our church need to be established in order to qualify for a property tax exemption?
There is no time limit, and every situation is different. Tax authorities do not like to give out exemptions. If they can find a reason to deny them, they often do. You may be more likely to succeed in getting your tax exemption approved after your church has operated for a few years. Showing a few years of operation will make it harder for them to deny your application. On the other hand, if you have a separate location for your church and have a regular congregation that attends services, you can probably apply right away.
Once we get the exemption, how long does it last?
Different states and counties do this differently. Some places require you to file periodically, usually once a year, that you are still using the property as a parsonage. Everywhere, you are under an obligation to report when your property is no longer being used as a parsonage.
What happens when we retire?
Parsonages also apply to retired ministers.
I am a minister, but my spouse is not. If my spouse outlives me, will the parsonage continue?
The IRS does not permit parsonage allowances to surviving spouses of ministers if the surviving spouse is not also a minister, but IRS law does not apply to your property tax exemption. Your county may or may not permit the tax exemption to continue. Have the church give notice to the county that it desires to continue the parsonage for the surviving spouse, and it might work. If your church can make the surviving spouse some kind of special class of minister, that would be best. Consider doing that now, rather than later. Use of the term minister in the title, instead of something lesser, like deacon, will help.
Can we rent out part of our property?
Unless you are renting to another minister, the part of your property that you rent out is not a parsonage, will need to be reported, and your tax exemption for that portion of the property will terminate.
What if our property tax exemption is denied?
If you are a minister in a church with a congregation, physical location, and regular services, your exemption will probably be easily approved. However, if your church is harder for the tax assessor to recognize, such an Internet ministry, you might have some difficulty, which is why we recommend that you use a local attorney with local political connections. If you do not get your exemption, you can appeal, but it could be difficult, costly, time consuming, and unlikely to succeed.
We already get a housing allowance from our church. Can we still do this?
Yes. You will, of course, have to pay self-employment tax on your housing allowance, but you will still get the benefit of the property tax exemption.
We also have a summer home. Can that be a parsonage, too?
Typically, only one parsonage is allowed. However, you may be able to do a similar arrangement and make the summer home a church retreat. You will have control of who uses it, since you will be the trustees. Change the word “parsonage” to “retreat” in the forms. Members who are not ministers may also be able to do this with the cooperation of the church.
We have a ministry or fellowship, but not a church. Can we still get a parsonage exemption?
In most jurisdictions, probably not. You could put your ministry under the umbrella of a church, or you could just form your organization as a church. It is easier to do than you might think and gives you far more legal protections. Contrary to what many people believe, it is not necessary for a church to file for 501(c)(3) non profit status. Churches are automatically tax exempt charities. Feel free to use our church trust form as a basis for yours and modify it to suit your church.
Can I just call myself a minister and get a property tax exemption?
This system is not designed or intended to be used for tax avoidance purposes. If your ministry is very part time, or your church is a church in name only, your local tax assessor may not grant you the parsonage exemption, even if all the forms are correct.
You are providing valuable information and forms. Do you charge for this?
No. If you want to send us some of your tax savings, we would gladly accept it, bless it, and put it to good use, but that is not why we are providing this. Far more important to us is that you apply our suggestion, above.
Can you give us personal help on this?
No. We strongly suggest that you contact a local attorney. Most attorneys who do wills and trusts also do real estate. Your legal fees on this should only be a few hundred dollars. Shop around. An attorney who is connected politically might also be more successful in getting your property tax exemption approved, and may be worth a slightly higher fee.