What is the Tax Effect of Transferring Personally Owned Real Estate to a Revocable Trust?

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

As I give you the answer to the title of this post let me discuss two different issues presented by the question:

The first issue is whether a deed from a settlor (a settlor is the owner of the real estate) to a trustee of a revocable trust is exempt from the N.J. Realty Transfer Fee tax (RTF). As long as the trust is established for the “exclusive benefit of the grantor”, under N.J.A.C. 11:16-5.11. it should not make a difference that the transfer is to a trust because the logic of the exemption is that the grantor is still the beneficial owner of the real estate. So no tax is due.

Secondly, if the owner conveys, title to the real estate to a trustee of a revocable trust, can he or she later to claim a senior citizen [partial] exemption from the Realty Transfer Tax upon the sale of the realty? The answer is no, because the partial exemption is said to be personal, and may not be claimed by a trustee of even a revocable trust, see N.J.A.C. 18:16-5.2. There is one exception though, the retention of a life estate tax the grantor. Then the exemption will apply.

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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