[WSBAPT] Excise tax on inherited properties of FLP and RLT

[Claudia A Gowan]

Kira, there are a lot of facts that would need to be considered but an option that you may have is to codify the agreement of the beneficiaries under a non pro-rata exchange and distribution agreement. It may be that the best thing to do is to distribute the properties outright to the individual and from there to personal LLCs/revocable trusts because generally, a distribution of one’s own property to their own LLC or revocable trust is exempt from REETA. Just based on what you describe, it seems like this could be handled without REET applying but what the Will/Trust/Pshp agmt say may have an influence.

Best, Claudia


Claudia A. Gowan

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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Kira Rubel
Sent: Thursday, January 07, 2021 3:20 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] Excise tax on inherited properties of FLP and RLT

Hello list!

I have three clients who inherited 9 properties from their now-deceased parents, out of the parents' Family Limited Partnership and the parents' living trust. Now, we're in the process of transferring title to each child's LLC or living trust.

The parents did not leave specific properties to specific kids, rather all properties were left to all three children. The three adult children decided among themselves how to divide up the properties (and cash). Each child is taking 3 properties in their entirety.

My office spoke with the DOR-Excise Tax department and they said we might have an excise tax problem for 2 reasons. One, all properties were left to all 3 kids to divy up as they please. Two, is it even possible to transfer the properties directly from the parents' FLP/RLT to each child's LLC or own living trust?

Has anyone done this in practice? I'm concerned about getting the WAC exemption correct!

Many thanks!

Kira M. Rubel, Esq.

*Licensed in CA and WA
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