[WSBARP] Excise Tax Exemption for married and separated persons transferring property from one to the other

Sun Feb 16 14:27:43 PST 2020

I see where you’re coming from Eric, and agree with your reasoning, but I still think that the language in Rule 203(1) is pretty straightforward, and when I read through the rest of the rules, I don’t see any exceptions.  The transaction certainly isn’t going to get flagged when the quit claim deed is recorded (albeit there is a 4 year SOL for audit).

If it is is really a concern, you can always get a ruling from the Department of Revenue. You can submit the request online. In my experience it will take 3 to 6 weeks to get a response.

On Feb 12, 2020, at 2:04 PM, Eric Nelsen <Eric at sayrelawoffices.com> wrote:

Kailei's post might be correct in this circumstance; I had not thought of the refinance and elimination of debt in husband's name as a kind of consideration. If that is planned as a permanent arrangement and is genuinely considered part of a permanent property division, they would be better served to complete a legal separation and obtain a division of property order so they can qualify under WAC 458-61A-203(2).

On the other hand, I do think it is permitted for spouses to recharacterize debt obligations between themselves, though they can't affect rights of creditors and other third parties.

If this were simply a married couple who decided to refinance the house in one spouse's name, I don't think any REET would apply on the QCD conveyance of one spouse to the other to establish separate property for purposes of refinance, even though the debtor changes from "John and Jane Doe, a married couple" to "Jane Doe, a married person as her separate estate."

Trickier question than I had thought at first glance.

Sincerely,

Eric

Eric C. Nelsen
Sayre Law Offices, PLLC
1417 31st Ave South
Seattle WA 98144-3909
206-625-0092
eric at sayrelawoffices.com

From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of Eric Nelsen
Sent: Wednesday, February 12, 2020 11:42 AM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] Excise Tax Exemption for married and separated persons transferring property from one to the other

Leaving aside all the other issues concerning separation of assets in a sort-of separated but not divorced situation—

Yes, since they are still legally married, WAC 458-61A-203(1)<https://apps.leg.wa.gov/wac/default.aspx?cite=458-61A-203> applies. No separation contract is required, as married couples are free to recharacterize property as community or separate without incurring excise tax under that subsection (1).

Sincerely,

Eric

Eric C. Nelsen
Sayre Law Offices, PLLC
1417 31st Ave South
Seattle WA 98144-3909
206-625-0092
eric at sayrelawoffices.com<mailto:eric at sayrelawoffices.com>

From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> <wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com>> On Behalf Of Jim Doran
Sent: Wednesday, February 12, 2020 11:00 AM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>>
Subject: [WSBARP] Excise Tax Exemption for married and separated persons transferring property from one to the other

Not an uncommon situation:  H & W have  been separated for 8 years.  Both have their names on the title.  Wife has been living in the home and wants to refinance the loan.  To do so, she has to get Husband off of the title.  Husband is willing to sign a QCD.  They do not have a legal separation agreement or order/decree.

Does the below WAC, 456-61A-203 work for this?  Do they need a separation agreement?  Do they need a Decree of Legal Separation?  Is there another WAC that works for this exemption?

  WAC 458-61A-203 Community property, dissolution of marriage or domestic partnership, legal separation, decree of invalidity. (1) Community property. Transfers from one spouse or domestic partner to the other that establish or separate community property are not subject to the real estate excise tax. (2) Court decree. The real estate excise tax does not apply to any transfer, conveyance, or assignment of property or interest in property from one spouse or domestic partner to the other in fulfillment of a settlement agreement incident to a decree of dissolution, declaration of invalidity, or legal separation. (3) Transfers to third parties.

James

James R. Doran
Attorney at Law
100 E. Pine Street -  Suite 205
Bellingham, WA 98225
(360)393-9506
jim at doranlegal.com<mailto:jim at doranlegal.com>
www.doranlegal.com<http://www.doranlegal.com>
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