[WSBAPT] RE Excise Tax question
Eden Rubenstein Toner
attorneytoner at earthlink.net
Wed May 18 16:20:51 PDT 2016
Thanks, Mike, for your response. Patrick, to answer your questionsthis is
not a distribution from the trust, it is a transfer in satisfaction of a
debt. Otherwise, at clients death, clients estate would hold all these
promissory notes and would have to have to collect on them from the
successor trustees/remainder beneficiaries. Since there are no other assets
in the trust, the property would have to be sold in order to pay the debt
off. By transferring now, the debt will be paid, the clients executor will
not have to chase down the remainder beneficiaries, and the clients family
can choose to keep the property.
Eden
From: wsbapt-bounces at lists.wsbarppt.com
[mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Patrick J. Galloway
Sent: Wednesday, May 18, 2016 2:59 PM
To: WSBA Probate & Trust Listserv
Subject: Re: [WSBAPT] RE Excise Tax question
This one has me curious. I am not sure I understand the fact pattern or the
estate planning strategy that was being implemented. Is there a tax benefit
that was gained from the promissory notes? Is this an attempt to avoid
claims of other beneficiaries of the trust? Is the client not a beneficiary
of the trust?
Can the trust simply make the distribution and dissolve? I am not sure why
you would need to pay REET on a gift/inheritance and what the benefit of
making the transfer for consideration is. Just looking for some education
from the group on this one.
Thanks,
Patrick J. Galloway
Advance Legal Services, PLLC
8113 W. Quinault Ave. Suite 101
Kennewick, WA 99336
(509) 851-7884
www.alsnorthwest.com
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From: mike at winslegal.com
To: wsbapt at lists.wsbarppt.com
Date: Wed, 18 May 2016 14:06:27 -0700
Subject: Re: [WSBAPT] RE Excise Tax question
Under the provisions of the Real Estate Excise Tax rules the transfer of the
interest is for value, equal to the relief from debt, so would be subject to
tax as a sale. If there is remaining debt, that debt is not part of the
consideration paid for the transfer.
http://app.leg.wa.gov/wac/default.aspx?cite=458-61A-102
see the definition of consideration and sale.
Michael A. Winslow
1204 Cleveland Ave.
Mount Vernon, WA 98273
Ph. 360-336-3321
Em. Mike at winslegal.com
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intended recipient, its too late to stop reading this message, but you may
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From: wsbapt-bounces at lists.wsbarppt.com
[mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Eden Rubenstein
Toner
Sent: Wednesday, May 18, 2016 1:28 PM
To: WSBA PT list
Subject: [WSBAPT] RE Excise Tax question
Im trying to figure out the RE excise tax computation in this situation:
Client owns ½ interest in property. A testamentary trust of which client is
Trustee owns the other ½. There are no other assets in the trust. Client
occupies the property and has paid mortgage, taxes, insurance and all
expenses for many years, keeping track of all payments and issuing a
promissory note from the trust to client each year. The trust is now
indebted to client for more than the value of the trusts interest in the
property. Client wants to deed the property from the trust to client in
full satisfaction of the debt, despite the fact that the debt is greater
than the value of the property.
Questionsis tax due on the full amount of the debt being satisfied, or just
the actual amount satisfied? Does it matter that the debt is not secured by
the property? And if client continues to pay the full amount of the
mortgage, is half the outstanding mortgage value part of the excise tax
computation?
Thank you in advance for any guidance.
Eden
Eden Rubenstein Toner
Attorney at Law
1600-B SW Dash Point Road, #163
Federal Way, WA 98023
phone 206-953-4485
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