[WSBAPT] REET Taxation of Transfers of Real Property by Inheritance

Mon Dec 21 10:52:40 PST 2015

Sherry/Dwight

Believe me practicing in Grant County with the positions taken by our
treasurer on these issues has been exasperating to say the least. We
wholeheartedly endorse this proposed change.

Does the proposed change exempt the transfer of community property between
spouses that occurred by operation of law, let's say 10 years ago, by reason
of the death of one of the spouses? Our wonderful treasurer continues to tax
such transfers that occurred prior to the enactment of RCW 82.45.197 and the
accompanying WAC. 

Thanks, 

Brian Dano

cid:image001.gif at 01CB9521.A4B69680

100 E. Broadway

P.O. Box 1159

Moses Lake, WA 98837 

Ph: 509-765-9285

Fax: 509-766-0087

email: bricyn at danolawfirm.com <mailto:vicki at danoharper.com> 

Estate & Family Business Succession Planning

Probate & Trust Administration

Real Estate(Ag & Commercial) & Escrow Closings

LLC Creation, Organization & Maintenance

Business/Commercial Transactions & Escrow Closings 

From: wsbapt-bounces at lists.wsbarppt.com
[mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Sherry Bosse Lueders
Sent: Monday, December 21, 2015 8:49 AM
To: wsbapt at lists.wsbarppt.com
Subject: [WSBAPT] REET Taxation of Transfers of Real Property by Inheritance

Section Members, FYI:

This message to the Washington real property, probate and trust lawyers is
to solicit feedback related to a proposed statutory change. I act as the
Co-Chair of the Legislative Committee of the Washington Land Title
Association [WLTA].

WLTA members propose a statutory amendment that will terminate the burden to
pay real estate excise tax [REET] upon transfers of ownership of real
property that occur by operation of law due to Wills, trusts, divorces,
court decisions, mergers, etc.

WA law has not been changed to require such transfers to pay REET. The law
remains that only sales of real property require payment of REET. There are
many changes in ownership that occur by operation of law that are not
taxable as sales. Such transfers often require no deed of conveyance or
recordation.

Transfers that occur pursuant to devise made by a Will are not taxable.
Transfers that occur due to the death of an owner pursuant to the legal
effect of intestate succession, community property, joint tenancy, life
estates and transfer on death deeds are not taxable. These changes in
ownership are not required to pay REET, even if there is no probate or court
proceeding. See RCW 82.45.010
<http://apps.leg.wa.gov/rcw/default.aspx?cite=82.45.010> (3). 

Transfers of ownership that are accomplished pursuant to court orders, such
as partition, divorce, condemnation and quiet title, are not taxable.
Changes in title to real property that occur by changes in the owner entity
that are not sales are not taxable, also as provided by the cited statute.

In 2008 the Legislature enacted a new statute, now known as RCW 82.45.197
<http://app.leg.wa.gov/RCW/default.aspx?cite=82.45.197> . See SSB 6851 and
Chapter 269, Session Laws of 2008
<http://leg.wa.gov/codereviser/documents/sessionlaw/2008pam2.pdf> . It
provided the documentation to be provided to the County Treasurer to claim
exemption from REET when the parties wanted to record a conveyance pursuant
to inheritance.  It begins: 

In order to receive an exemption from the tax in this chapter on real
property transferred as a result of inheritance under RCW 82.45.010(3)(a),
the following documentation must be provided:

See also WAC 458-61A-202
<http://apps.leg.wa.gov/wac/default.aspx?cite=458-61A-202>  related to the
exemption from REET for inheritance transfers, that states, "Transfers of
real property by inheritance or devise are not subject to the real estate
excise tax."

At some point about four years ago a couple County Treasurers [Grant, Skagit
& Yakima] began interpreting RCW 82.45.197 as authority to require heirs who
receive title by inheritance to pay REET if they did not have proper
documentation. The position taken was that a probate was required to avoid
REET. This affected only a few people because most intestate and non-probate
heirs were not recording documents and not filing excise tax affidavits.

However, due to changes made by the Department of Revenue to its Regulations
related to REET, all transfers by operation of law are now required to file
an excise tax affidavit. Previously, the Regulations required an excise tax
affidavit and specified the documentation that was required to claim
exemption from REET for transfers by operation of law only when conveyance
documents were recorded.

A change was made February 28, 2014 to WAC 458-61A-303
<http://apps.leg.wa.gov/wac/default.aspx?cite=458-61A&full=true#458-61A-303>
[the regulation that explains when a real estate excise affidavit is
required]. It was not made due to a change in the substantive law. 

WAC 458-61A-303 Affidavit. (1) Introduction. This section explains

when a real estate excise tax affidavit is required for the

((conveyance)) transfer of ((an interest in)) real property. See WAC

458-61A-101 for procedures pertaining to transfers and acquisitions of

a controlling interest in an entity owning real property in the state

of Washington. (2) Affidavit required. In general, an affidavit must be
filed

when ownership or title to real property transfers as evidenced by

conveyance, deed, grant, assignment, quitclaim, or any other document

effectuating the transfer including, but not limited to, the following:

(b) ((Conveyance)) Transfer resulting from a court order;

(g) ((Conveyance)) Transfer to an heir in the settlement of an

estate;  

In the past two years, increasing number of County Treasurers are actively
enforcing the payment of REET for inheritance transfers. When heirs sell the
property, the Treasurers are requiring excise tax affidavits related to the
prior change of ownership, regardless of the amount of time. If the
documentation isn't perfect, the heirs as sellers must pay REET and
penalties before the intended sale may be recorded. 

The protests of these people are increasing, in part because Snohomish
County, a more populous county, has begun to tax the higher volume of such
prior transfers.

The WLTA proposes to amend RCW 82.24.197 to expand the potential
documentation that will satisfy their right to claim exemption from REET. At
the same time, WLTA seeks to clarify that all transfers by operation of law
do not require excise tax affidavits and recordation of affidavits in order
to avoid REET.

If you have comments or questions, or if you are interested to contribute to
the legislative process, please contact me or the representatives of the
RPP&T Section.

Dwight A. Bickel

Legislative Committee Co-Chair

Washington Land Title Ass'n

701 - 5th Avenue, Suite 2300
Seattle, WA 98104
Phone: (206) 370-3189

E-mail:  <blocked::mailto:Dwight.Bickel at fntg.com> Dwight.Bickel at fntg.com

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