California Real Estate SalespersonTransfer of PropertyMedium
A property owner transfers title to their personally owned property into their own revocable living trust for estate planning purposes, with no change in beneficial ownership and no consideration paid. What documentary transfer tax is owed on this transfer?
- ANo documentary transfer tax is due, because there is no change in beneficial ownership
- BDocumentary transfer tax based only on any outstanding loan balance
- CFull documentary transfer tax based on the property's fair market value
- DHalf the standard documentary transfer tax rate applies
Show answer & explanationAnswer & explanation
Correct answer: A. No documentary transfer tax is due, because there is no change in beneficial ownership
California's Documentary Transfer Tax Act exempts transfers where there is no change in beneficial ownership and no consideration, such as transfers into one's own revocable living trust; the grantor remains the beneficial owner, so the tax does not apply.
Why the other options are wrong
- B. There is no loan assumption triggering tax in a transfer to one's own trust.
- C. Transfer tax applies based on consideration or value change in ownership, neither of which occurs here.
- D. There is no partial-rate provision for trust transfers; it is fully exempt, not half-taxed.
Documentary Transfer Tax Exemptions
Certain transfers, such as those into a revocable living trust with no change in beneficial ownership, are exempt from California's documentary transfer tax.
- Tax is based on consideration paid or value transferred, minus liens remaining
- Exempt transfers include gifts, trust transfers without ownership change, and transfers between spouses
- Exemption must typically be stated on the deed or a claim form
Memory trick: No change in who really owns it, no tax owed.