For as long as I can remember, clients have paid the $40 minimum real estate transfer tax to transfer real estate into a revocable trust. Effective June 21, 2016, transfers into a revocable trust for estate planning purposes will be exempt from real estate transfer tax, under RSA 78-B:2, XXI.
The revised real estate transfer tax statute adds an exemption from the real estate transfer tax for transfers in which no consideration is exchanged and the change in merely title results in a change in the transferor's form of organization. The exemption requires that the assets and liabilities of the transferor immediately before the transfer are the same as those of the transferee immediately after the transfer. Specifically included is a statement that a beneficial interest in a trust is considered an ownership interest in the trust.
In addition, there is a modification to the statute that specifies that when transfers are made solely to obtain financing or refinancing, as required by a lender, the transfer will not be considered to be for consideration sufficient to result in the imposition of real estate transfer tax, which is $15 per $1,000 of consideration. In the past, we have cautioned clients not to transfer their property out of their revocable trusts in connection with a refinancing, for fear of incurring the full real estate transfer tax. Those days are over. It is now possible to transfer the home out of the trust to facilitate a refinancing without concern about triggering the real estate transfer tax. Of course after the refinancing is completed, we recommend that clients convey the property back into the revocable trust.
Finally, there are implications of this legislation that suggest that there would be no real estate transfer tax imposed in the context of a client transferring property into an LLC as long as the equitable ownership of the property before the transfer is the same as after the transfer. For many years, clients have refrained from transferring rental or commercial properties into an LLC because of the imposition of the full real estate transfer tax. As a result in the modification to the statute governing real estate transfer tax, individuals will be able to transfer a rental property or commercial property into an LLC and provided that the assets and liabilities of the transferor before the transfer are the same as the assets and liabilities of the transferee after the transfer, no real estate transfer tax will be due. This change in the law will most certainly result in the creation of many more LLCs, as LLCs can offer business asset protections not available individual owners.
If you have questions about how this change in the law applies to your situation, feel free to call the office and schedule an appointment to discuss it with Alyssa or me. Enjoy the rest of the summer.