I bought a duplex in my name and wish to transfer it to the LLC I just created. It is located in Luzerne County, PA.

A more seasoned investor (form outside this area) told me to quit claim the property from myself to my LLC. Simple as going to the courthouse and do a "form and a fee". What I want to know -- and cannot find out -- is this. If I transfer ownership from myself to my LLC, do I also have to pay the real estate transfer tax? Some people tell me "no" and no one has been able to tell me "yes".

Has anyone in here had a similar circumstance?  Thank you in advance.

GG

@George Gallagher Check with either the courthouse or the PA Dept of Revenue, but I think that you'll find out that the advise you were given is mistaken.; and that a transfer to an LLC will require a Transfer Tax. They have been very aggressive in persuing what they consider delinquent taxes, and they courthouse won't record without a Statement of Value and an explanation of the exemption requested.

Also some other factors to consider:

1. The transfer/sale to your LLC will also cancel your title insurance that was issued to you.

2. Why would you use a Quit Claim Deed which does NOT have any warranty.  Presumably you got either a Special Warranty or a General Warranty when you bought the property.  But a transfer by Quit Claim Deed has no warranty.

3.  If you bought the property with a mortgage from a lending institution like a bank, credit union or mortgage banker, the mortgage in all likely hood has a due on sale clause which the sale would put you in technical default.  In practicality banks aren't usually chasing due on sale foreclosures, but if interest rates rise there might be a business decision to go after these to increase their interest rate yields.

I see similar circumstances daily as an asset protection attorney. I'm hoping what I'll share with you could save you a lot of time. You're actually set up just fine to make a transfer that won't break the bank. The main reason people are probably telling you not to make this transfer is because they're concerned it would cost you your financing. Most mortgages have a "due on sale" clause that can be triggered by transferring the property directly into an LLC. Investors make a really big deal about the Due-on-Sale clause, but the truth is, we don't need to. There's a pretty simple solution for incorporating your property into the LLC without having to worry about this. I've written a more detailed description that was a featured article here on BP, but here are the basics:
1. Buy property in your own name.
2. Transfer ownership of the property to a Land Trust
3. Incorporate the Anonymous Land Trust into your LLC structure. This is actually more straight-forward than most people think, but it's helpful to have a competent real estate attorney with experience in Land Trusts to assist you.

It's great that you have an LLC to protect your new rental asset. Way to think ahead. Because you made the choice to get an LLC, you won't have to worry about lawsuits as much as someone who has made the mistake of keeping property in their own name. Yes, I know I just told you about a method that involves buying property in your own name, but know that it doesn't stay in your name when you execute this transfer correctly. As a bonus, the Anonymous Land Trust will beef up your protection strategy for this asset while also allowing you a way around that pesky Due on Sale clause.

@George Gallagher

Short answer: you'll have to pay the realty transfer tax. 

Longer answer: generally you'll have to pay the realty transfer tax. Now there are various exceptions to this and I suppose there is a chance that you fall under one of them. But the exceptions are pretty darn specific. 

Also see the other concerns that @David Krulac raised. 

If you are concerned about liability, I would just work with an insurance broker to make sure you got the right coverage. I'm not saying LLCs are useless but they are also not a cure-all. 

If you are worried about privacy, I supposed you can try to do revocable trust. I personally wouldn't do it since I personally don't think it is that important. But each to their own. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information

@Scott Smith is correct.  For "estate planning purposes" you can transfer property from your name into a land trust without triggering the Due on Sale clause, or incurring transfer tax.  Most PA lawyers don't realize this but my group does it all the time.  

The law was written to allow you to transfer to your own trust as an asset protection device, and it is a carve out in the Garin St Germain act of 1982, that created the due on sale clause in the first place. 

Because you still own/control the property, there is no transfer tax due to the state. The state's own form actually says this when you record the trust.  

PA is the only state in the union that requires you to record your trust in public record.  That sort of screws up the trust. It shows, clearly and in public who the beneficial interest of the trust is and who the trustee is. Now, you can change that AFTER you record the trust and that change is not filed anywhere in the public domain. 

I hope that helps

Josh 

@George Gallagher

If you want to read more about what @Josh Caldwell is mentioning, just Google "inter vivos trust" and "due on sale." Should take you to a bunch of articles talking about Garn-St. Germain.  You can also go to the actual statute and see what it says. I can't recall the exact language but it's something like "you can transfer the property into an investor vivos trust where the borrower remains a beneficiary and occupant of the property." 

But again, I'm not sure how much "asset protection" these kinds of trust provide. Maybe they provide deterrence against really frivolous lawsuits where the plaintiff can't even afford an attorney. But for any "serious" lawsuits, I have a hard time seeing how it offers any meaningful protection. That's especially true if the grantor and the beneficiary is basically the same person. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information

@George Gallagher

I was actually going to do the same just last week on a property in Schuylkill County till I saw the transfer tax bill. 

Originally posted by @Steven Perre :

@George Gallagher

I was actually going to do the same just last week on a property in Schuylkill County till I saw the transfer tax bill. 

 I am in Schuylkill county as well, and planned to do this. What am I in for?