[WSBAPT] Estate Distribution Issue re: Excise Tax

Tue Jan 30 12:52:42 PST 2024

The Seller owes the excise tax, but the Buyer can pay some or all the excise tax, which is what you may want to do under your scenario below.

Stuart Scarff, Esq.
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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Mark Anderson
Sent: Tuesday, January 30, 2024 9:48 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Estate Distribution Issue re: Excise Tax

Given the initial scenario, one way you could handle it would be for the Estate to distribute a percentage ownership of the real property to the Beneficiary (equal to the inherited share) and have the Estate retain the remainder as a tenant-in-common.  Then the Beneficiary buys the remainder from the Estate.  Without any agreement to the contrary, the Estate would pay the excise tax on this transaction.  I think this is an appropriate expense of the Estate (and not the Beneficiary) as a cost of administering the disposition of the real property.  In the past, I have had all Beneficiaries enter into an agreement under which the excise tax would be paid for by the Estate - this would have the effect of placing the burden of the excise tax on all Beneficiaries.

Mark B. Anderson
ANDERSON LAW FIRM PLLC
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From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Jane Bitz
Sent: 01/26/2024 4:00 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: [WSBAPT] Estate Distribution Issue re: Excise Tax

Hi All:

I have an estate where a beneficiary is going to receive a parcel of real estate that exceeds his share of the estate. He is going to pay the difference between his inherited share and the price of property. My issue is that when we calculate the Excise Tax (calculated on the amount paid, not the property value) and include it as an estate expense (seller's cost), it decreases the beneficiary's share that will be distributed, so it increases the amount he has to pay in to the estate and thus, increases the amount of the excise tax payable.

Is there any simple way to "fix" this issue? I have considered just having him pay "more" than is required to equalize the distribution and then rebate any extra in the estate back to him. This means he is "paying" more than he has to for equalization and the estate is paying more in excise tax on the transaction.

Wondering if anyone else has run into this particular issue?
Thanks.
Jane.

Jane Bitz
Of Counsel
Helping Good People do Great Things!
12209 E. Mission Ave., Suite 5
Spokane Valley, WA 99206
(509) 927-9700 (Phone)
www.whc-attorneys.com<http://www.wolffandhislop.com/>

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