Many New Yorkers who say they were mistakenly swept up in the city's new pied-à-terre tax share one thing in common: They own their home through a trust.

They are among those complaining that the city is putting the onus on them to prove they shouldn't have to pay the second-home surcharge.

A New York judge temporarily blocked the rollout of the new law on Monday, while the court reviews a lawsuit by homeowners claiming that the city hasn't properly identified owners of pieds-à-terre subject to the tax.

Putting a home inside a trust is a common financial planning strategy for those looking to ease the burden on heirs or avoid estate taxes. Limited liability companies are also favored by homeowners seeking privacy.

But these legal arrangements obscure a property's ownership, making it more difficult for the city to determine whether it is subject to the new tax. The city has cast a wide net to find owners who owe on pieds-à-terre, sending letters to many of these trusts and asking the homeowner to prove they should be exempt, according to homeowners and the lawyers working with them.

The pied-à-terre tax is aimed at homes worth $5 million or more and co-ops and condos worth $1 million or more where the owner isn't a primary resident. It may also apply to some properties owned by trusts or LLCs even if a beneficiary or member is a primary resident.

But not all details of a trust or LLC, such as the terms or number of beneficiaries, are readily available.

City officials have said they don't always have the information they need about a home to know whether it is a primary residence. As a result, they have sent out more notices to homeowners than the tax will ultimately apply to.

"Part of the point of this outreach from the Department of Finance is to ascertain whether or not that reflects a primary residence or not," Mayor Zohran Mamdani said at a news conference last month, referring to homes owned by trusts and LLCs. "One of the reasons that this is being done now is to ensure that New Yorkers have requisite time before the implementation of the surcharge."

About a week after the city began sending the tax notices, roughly 3,800 people of the 17,000 who were sent letters started exemption applications, according to a spokesperson for the mayor's office.

The city has said it is prepared to vigorously defend itself against the lawsuit.

Under the pied-à-terre tax rules, a property can be exempt from the tax if it is owned by a trust with a sole beneficiary and is occupied by a primary resident. Beneficiaries with future interests in a trust such as children who stand to inherit when a parent dies don't need to be primary residents, the city has said. That means a couple that has transferred their primary home to a revocable trust -- a move often made to help heirs avoid probate -- should be exempt from the tax.

Still, several New Yorkers with these kinds of trusts told The Wall Street Journal they received letters from the city. One resident of Brooklyn's brownstone-filled Park Slope neighborhood said he and his wife were shocked to receive a letter after owning and living in their home -- and paying New York City income taxes -- for 42 years. Last year, each spouse transferred 50% of the house to a revocable trust in their name.

"Our records indicate the property above may be subject to the new surcharge," states the letter, a copy of which was reviewed by the Journal. "Based on your property's fiscal year 2027 market value of $5,479,000, the surcharge would be $43,832 unless you are granted an exemption."

The letter provides the website where owners can apply for exemptions, which the Park Slope resident is doing. When he called to complain to the office of his city councilwoman, Shahana Hanif, the person who answered the phone said she had received a number of similar calls.

Many other longtime residents have reported erroneously receiving letters. Michael Cohen, President Trump's former personal attorney and fixer, said in an interview that he received one for his condo at Trump Park Avenue on the Upper East Side. The home is owned by a qualified personal residence trust, he said. These have a single beneficiary by definition and thus should be exempt from the tax. The New York Post previously reported on Cohen's letter.

Some 28% of Manhattan home sales involved a trust in 2024, according to data-provider Attom.

Homes owned by LLCs can be exempt from the tax if a member, or members, who use the home as a primary residence own a majority of the LLC. Primary residents who are family members of these majority owners may also cause the property to be exempt.

Property owned by an irrevocable trust -- a structure used to move property outside of an individual's taxable estate -- could be subject to the tax even if one of its beneficiaries lives there full time. Say the home is in an irrevocable trust with three beneficiaries, including a parent and two adult children. If one of the children lives in the house, the trust would be subject to the pied-à-terre tax, according to John Pelet, an attorney at Loeb & Loeb.

He has been advising clients in this situation to consider options such as transferring the property to a new trust with the primary resident as the sole beneficiary, a process known as "decanting."

Another solution could be for the primary resident to lease the property from the trust. The lease would need to be standard -- at market-rate and with a one-year term. But the trust could end up owing income taxes.

"Are you cutting off your nose to spite your face?" Pelet said. "In a lot of cases, it's not worth the complications."