Does the New Jersey Real Estate Transfer Fee Apply to a Transfer of Real Estate to a Revocable Trust?

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Trust Attorney

A widow with no children, created a revocable trust in Colorado when she lived there. She moved to NJ and bought a house subject to a mortgage in her own name. She now wants to transfer the NJ property to the trust. Assuming the mortgage lender allows it (it likely will) the question is whether the transfer is subject to the NJ realty transfer fee based on the current balance of the mortgage loan? If so, other than paying off the mortgage loan, is there any way around paying the fee?

While the law exempts a transfer between an individual and a trust being administered for the benefit of the grantor (which a revocable trust does), there is also the question of the mortgage on the property. The definition of “Consideration” as used in the statute defined this term as follows: “Consideration” means, in the case of any deed, the actual amount of money and the monetary value of any other thing of value constituting the entire compensation paid or to be paid for the transfer of title to the lands, tenements or other realty, including: The remaining amount of any prior mortgage to which the transfer is subject or which is to be assumed and agreed to be paid by the grantee;

Presuming the grantor is not transferring the responsibility for the mortgage to the trust but retaining it, this should qualify for the exemption.

I suggest that the consideration be stated in the Deed as being less than $100 and that the Deed also contain language confirming there is a mortgage but it is remaining the responsibility of the grantor and that it is not being assumed by the grantee. This should assure that the transfer is exempt from payment of the Realty Transfer Fee.

Note the wording of the statute: N.J.S.A. 18:16-5.11 Transfer of property to trustee for exclusive benefit of grantor

(a) A transfer of realty to a grantee in trust to hold the property for the exclusive use and benefit of the grantor is not subject to a realty transfer fee, since the rights of ownership are still completely enjoyed by the grantor as beneficial owner.

(b) A transfer of realty to a grantee in trust to hold the property for the benefit of other beneficiaries is subject to the realty transfer fee, since the grantor has divested himself or herself of the benefit of ownership.

To discuss your NJ Trust and Real Estate matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.

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