[WSBARP] REETA

[Eric Nelsen]

I think the HELOC is not a problem, because it’s not a refinance. That is not a guarantee that DOR won’t question it, however. But even if they did question it, I think the children would win the challenge.

Analysis:
WAC 458-61A-103 says the concern is “underlying debt” where grantee “relieves grantor” from the debt burden. The HELOC was not ever a debt burden to the grantor parents.
WAC 458-61A-201(4) says a rebuttal presumption that the gift was a concealed sale is only if there is a “refinance” which by definition means a prior debt that the grantee did not previously assume and had tried to claim that grantor was continuing to pay. Compare to subsec. (3). Since grantee children are going to pay on the loan and will pay the REET at the time of the transaction on the basis of the loan amount they are assuming, there is no gift exemption to reverse.

The only scenario I see where the HELOC might be a problem is if the children took it out and paid the money to the parents. THEN that looks like additional consideration to the parents on which REET should have been paid.

Because of the possibility of that scenario, it’s conceivable that DOR will question the HELOC. But upon proof that the money is going into improvements and not to the parents, I think (hope) they would recognize it’s not an evasion of paying REET.

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 <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of Randy Boyer
Sent: Friday, November 8, 2024 2:51 PM
To: Real Property Listserve <wsbarp at lists.wsbarppt.com>
Subject: [WSBARP] REETA

Listmates

Parents want to add two children to title to the home property.  The children will start making payments on the existing loan and pay REET on the balance assumed.

The wrinkle is that they want to get a HELOC loan after the gift within six month to improve the existing home.  They will not be paying off the existing loan at that time.  Will the HELOC cause DOR to claim it is like a refinance seeking additional REET is due, penalties and interest.

Randy
Randy M. Boyer                                                 ______
Attorney, WSBA# 8665
Law Office of Randy M. Boyer, Inc. P.S.
7017 196th St. S.W.  Lynnwood, Washington 98036
• 425.712.3107|   Fax 425.778.2274
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