Some property transfers are exempt from taxes


July 21, 2002

Dear Mr. Azrael,

I have a rental property that is currently titled in my name. For asset protection purposes and estate planning, I want to place the property in a land trust and I have several questions:

Are there any particular issues about land trusts in Maryland that I should consider?

And I understand I can transfer title to this land trust entity without any transfer taxes due?, Jim Fuller


Dear Mr. Fuller:

A transfer of real property is subject to transfer and recordation taxes unless a specific exemption applies. For example, a transfer of real estate from an individual to a corporation owned by that individual is not exempt.

Therefore, the state and county will impose transfer and recordation taxes on a deed that conveys property to the corporation, even though there is no monetary consideration. The tax will be based on the full cash value of the property as determined by the tax assessment.

A transfer of property for no consideration from an individual to a trust of which that individual is the sole lifetime beneficiary is exempt from transfer and recordation taxes.

Other exemptions include transfers between spouses, no-consideration transfers between certain relatives, nonmonetary transfers between related corporations, and certain transfers from individuals to limited liability companies. The county director of finance or a clerk of Circuit Court in the land records office can provided further information about whether a specific transfer is exempt from transfer and recordation taxes.

Even though a transfer might be exempt from transfer and recordation taxes, the county court clerk still could require open real estate taxes and governmental liens to be paid before a deed of transfer will be recorded.

Whether unpaid taxes and liens must be satisfied is determined by the county in which the property is situated and varies among Maryland counties. Again, the county director of finance can tell you whether real estate taxes must be paid before a deed from you to a trust can be recorded.

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