Has anyone successfully used a Land Trust to avoid Transfer Tax?

Question

I unfortunately live in a State that charges a 2% transfer tax for any title change (even between "sister LLCs").  I have been looking at a Land Trust as a way to avoid this.  Has anyone used it successfully for this purpose, and has anyone done so in PA?

Ashish Acharya · Answer

If you transfer to a revocable living trust, there is no transfer tax in PA.  They have some specific requirements for the Living Trust but most of them meet those requirements.

Bill Exeter · Answer

Hi @David Cozzi,

You need to be very careful here.  As a trust company, we administer lots of Title Holding Trusts (Land Trusts) and I can tell you that an assignment of a beneficial interest in a Title Holding Trust (Land Trust) in most jurisdictions is considered to be a conveyance of title just like you recorded a deed.  The difference with the Title Holding Trust (Land Trust) is that nothing is recorded.

This does not mean that it legally avoids the transfer tax.  It only means that nothing is recorded and the person that did it was just not caught.  They key is understanding the local laws, regulations, etc., and defining what is considered a conveyance of title for transfer taxes.

As I stated above, an assignment of a beneficial interest in a Title Holding Trust (Land Trust) in most jurisdictions is considered to be a conveyance of title just like you recorded a deed.  Using the Title Holding Trust (Land Trust) to avoid the transfer tax is likely tax fraud.

John Underwood · Answer

I would think this would work. Nothing new is recorded with the Register of Deeds if you have the same trustee. You would just update the beneficiaries of the trust on your paperwork.

You could possibly even update the trustee without it looking like a sale or transfer.