[WSBARP] Excise tax on inherited properties out of FLP and RLT

[Jennifer L White]

Looks like this nonpro rata WAC exemption example:
WAC 458-61A-202
Inheritance or devise.
(1) Introduction. Transfers of real property through a devise by will or inheritance are not subject to the real estate excise tax. For the purpose of this exemption, it does not matter whether the real property transferred was encumbered by underlying debt at the time it was inherited or devised.
(2) Definitions. For the purposes of this rule, the following definitions apply:
(a) "Heir" means a person, including the surviving spouse or surviving domestic partner, who is entitled under the statutes of intestate succession to the real and personal property of a decedent on the decedent's death intestate;
(b) "Lack of probate affidavit" means a signed and notarized document declaring that the affiant or affiants are the rightful heir or heirs to the property and containing the following information:
(i) The names of the affiant or affiants;
(ii) The relationship of the affiant or affiants to the decedent;
(iii) The names of all other heirs of the decedent living at the time of the decedent's death;
(iv) A description of the real property;
(v) Whether the decedent left a will that includes a devise of real property; and
(vi) Any other information the department may require.
(c) "Nonpro rata distribution" is a distribution in which the transfer of real property to the heirs or devisees may not be in proportion to their interests.
(3) Examples. This rule contains examples that identify a number of facts and then state a conclusion. These examples should be used only as a general guide. The tax results of other situations must be determined after a review of all of the facts and circumstances.
(4) Nonpro rata distributions. A nonpro rata distribution made by a personal representative of a probated estate or by the trustee of a trust is not subject to the real estate excise tax if:
(a) The transfer is authorized under the nonintervention powers of a personal representative under RCW 11.68.090<http://app.leg.wa.gov/RCW/default.aspx?cite=11.68.090> or under the nonpro rata distribution powers of a trustee under RCW 11.98.070<http://app.leg.wa.gov/RCW/default.aspx?cite=11.98.070>(15); and
(b) If no consideration is given to the personal representative or the trustee for the transfer.
For the purpose of this rule, consideration does not include the indebtedness balance of any real property that is encumbered by a security lien.
(c) Example 1. Aunt Mary wills her entire estate equally to her three nieces, Meg, Beth, and Jo. The estate consists of her primary residence, a cottage at the ocean, and significant cash assets, among other things. Rather than take title to the two parcels of real estate in all three names, the estate may be distributed by deeding the primary residence to Meg, the oceanfront property to Beth, and the majority of the cash assets to Jo.


Jennifer L. White, Esq.
[cid:image003.jpg at 01D6E41E.02DC9290]

jen at appletreelaw.com<mailto:jen at appletreelaw.com>
PO Box 11037
Yakima, WA 98909
509.225.9813

From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of Kira Rubel
Sent: Wednesday, January 6, 2021 11:00 AM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: [WSBARP] Excise tax on inherited properties out of FLP and RLT

Hello again, 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 since each property was left to all three children, rather than one property per one child.  Has anyone run into this before? There has to be a work-around, since this is inherited property!

Any and all guidance is appreciated!

Thank you!

Kira M. Rubel, Esq.

*Licensed in CA and WA
[https://drive.google.com/a/theharborlawgroup.com/uc?id=1E57YB_h2v4LJLf-5LkuttKj5KjL212Bk&export=download]

The Harbor Law Group
(formerly, Law Office of Kira M. Rubel)
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Tel.  (253) 358-2215 | (800) 836-6531
Fax. (253) 358-2191
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