[WSBAPT] Transferring LLC into Trust

Tue Oct 3 14:56:54 PDT 2017

Dewey raises several issues. My take is may be a bit different, or perhaps more detailed. 

Regarding the LLC, the annual report from the state asks if the LLC owns real estate. This is in compliance with:
RCW 43.07.390
Real estate excise tax enforcement—Disclosure of transfer of controlling interest, real property.
(1)(a) The secretary of state must adopt rules requiring any entity that is required to file an annual report with the secretary of state, including entities under Titles 23 <http://app.leg.wa.gov/RCW/default.aspx?cite=23> , 23B <http://app.leg.wa.gov/RCW/default.aspx?cite=23B> , 24 <http://app.leg.wa.gov/RCW/default.aspx?cite=24> , and 25 <http://app.leg.wa.gov/RCW/default.aspx?cite=25>  RCW, to disclose: (i) Any transfer of the controlling interest in the entity; and (ii) the granting of any option to acquire an interest in the entity if the exercise of the option would result in a sale as defined in RCW 82.45.010 <http://app.leg.wa.gov/RCW/default.aspx?cite=82.45.010> (2).
(b) The disclosure requirement in this subsection only applies to entities owning an interest in real property located in this state.
(2) This information must be made available to the department of revenue upon request for the purposes of tracking the transfer of the controlling interest in entities owning real property and to determine when the real estate excise tax is applicable in such cases.
(3) For the purposes of this section, "controlling interest" has the same meaning as provided in RCW 82.45.033 <http://app.leg.wa.gov/RCW/default.aspx?cite=82.45.033> .

The transfer of 100 % of units is a transfer of a controlling interest. See WAC 458-61A-101 which requires a report of sale by excise tax affidavit, even though there is an exemption.
(8) Reporting requirements.
(a) The transfer of a controlling interest in real property must be reported to the department when no instrument is recorded in the official real property records of the county in which the property is located. If the transfer is not taxable due to an exemption, that exemption should be stated on the affidavit.

Distinguish between  exemptions from reporting and exemptions from payment of tax. 

Look especially at the examples in Section 10. Even though there is no deed, it appears filing a REETA is required. You just cite the exemption, as found in WAC 458-61A-211 Mere change in identity or form—Family corporations and partnerships. This WAC explains the exemptions from tax, not the exemptions from filing reports of transfer of controlling interest.

The ownership of the LLC units and membership are transferred by simple assignment. Make sure you transfer both membership and units. Beware limits on transfer if this is a multiple member LLC with restrictions in the Operating Agreement or a Cross Purchase Agreement. If sole member, no problem. 

It is as simple as this:

Joe Smith and Mary Smith, H and W, hereby assign all right, title and interest in membership and member’s units represented by 100 units in XYZ, LLC, a Washington Limited Liability Company to Joe Smith and Mary Smith, Co-Trustees of the Smith Family Trust U/A 12/12/2013.
Date and Sign.

Michael A. Winslow
1204 Cleveland Ave.
Mount Vernon, WA 98273
Ph. 360-336-3321
Em. Mike at winslegal.com

This message is from an attorney, so it’s confidential. If you are not the intended recipient, it’s too late to stop reading this message, but you may not use it for any improper purpose. Huge Disclaimer available upon request.

From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Tom Westbrook
Sent: Tuesday, October 03, 2017 12:29 PM
To: 'WSBA Probate & Trust Listserv'
Subject: Re: [WSBAPT] Transferring LLC into Trust

Hi Dewey,

I have done that successfully in the past by transferring the ownership of the LLC from the Grantor of the trust to the Trust; even if there is real estate involved the excise tax exemption of mere change in identity has worked in the past. Ownership change can be made with SOS at any time, but not necessary until time for annual report.

Sincerely,

Tom

Thomas J. Westbrook
Attorney at Law

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Rodgers, Kee & Card, P.S.
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From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Dewey Weddle
Sent: Tuesday, October 3, 2017 11:43 AM
To: wsbapt at lists.wsbarppt.com
Subject: [WSBAPT] Transferring LLC into Trust

Esteemed colleagues,

I have been asked by a client to transfer an LLC into his Revocable Living Trust.  Although I have transferred real property into (and out of ) a Trust I have never transferred a business or corporation into a Trust.  Does anyone have any suggestions as to how to proceed, things to watch out for, if a government entity requires notice, and so on.  Any help is appreciated. 

Best regards, 

Dewey

Law Office of Dewey W. Weddle, PLLC
909 Seventh Street
Anacortes, WA  98221

Telephone:  360-293-3600
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