New Jersey's Inheritance Tax and its lien
One of the most contentious issues we deal with as a title agency is the lien for New Jersey Transfer Inheritance Tax that affects EVERY estate in New Jersey even if no tax is ultimately owed by the decedent's estate. Yes, that's right, even if no tax is owed, the state has a lien.
What follows is a brief explanation of the
Lien on and Transfer of a Decedent's Property: Tax Waiver Requirements
For Tax Professionals
New Jersey Transfer Inheritance Tax, whether levied and assessed
or not, is a lien on all property owned by the decedent as of the date of
his/her death for a period of 15 years, unless paid sooner or secured by bond.
The law provides, with certain exceptions, that without the written consent of
the Director (i.e. – tax waiver), banking institutions and other institutions,
corporations and persons may not deliver or transfer any assets within their
control or possession which belong to or stand in the name of a resident
decedent, or in the joint names of a resident decedent and one or more persons
(N.J.S.A. 54:35-5, N.J.S.A. 54:35-19).
For decedents who die after December 31, 2001, the New Jersey
Estate Tax is a lien on all property of a decedent as of his or her date of
death and that no property owned by a decedent as of his or her date of death
may be transferred without the written consent of the Director, or pursuant to
such rules as the Director may prescribe (N.J.S.A. 54:38-6).
The tax waiver form issued by the Division releases both the
Inheritance Tax and the Estate Tax lien and permits the transfer of property
for both Inheritance Tax and Estate Tax purposes.
Tax waivers are required to transfer the assets standing in the
name of a decedent or in joint names with a decedent such as:
- New
Jersey real property;
- Funds
held in New Jersey financial institutions;
- Brokerage
accounts or mutual funds doing business in New Jersey;
- Stock
or bonds of a company incorporated in New Jersey or a New Jersey
institution.
For information on obtaining a tax waiver go to: Inheritance Tax Filing Requirements
| Estate Tax Filing Requirements
Exceptions to Waiver Requirements
- Non-Resident
Decedents: Estate Tax waivers are not required for the estates of
non-resident decedents. Inheritance Tax waivers are required only for real
property located in New Jersey.
- Real
Property Held as tenancy by the entirety Real property held by a husband
and wife or civil union partners as tenancy by the entirety must be
transferred without a tax waiver in the estate of the spouse who died
first.
- The
transfer of any assets, whether real or intangible, which stand in the
name of a bona fide trust as of the date of a decedent's death, does not
require a tax waiver.
- Transfers
to savings accounts without a tax waiver
- Funds
of a decedent on deposit in a checking account in any bank may be
transferred to an interest-bearing account in the same bank in the name
of the decedent or his/her estate without obtaining a tax waiver.
- Funds
of a decedent on deposit in an Individual Retirement Account (IRA) or
Keogh retirement plan account may be transferred to another account in
the same bank without obtaining a tax waiver.
- Any
certificate of deposit or any type of a preferred account containing
funds of a decedent may be transferred to another account in the same
bank without obtaining a tax waiver.
- The
transfers permitted in (1) through (3) above are subject to the
requirement that the banking institution promptly file a notice with the
Division of Taxation Inheritance and Estate Tax Branch, PO Box 249,
Trenton, New Jersey 08695-0249, containing the following information:
- Decedent's
name;
- Date
of death and domicile;
- Name
and address of executor or administrator of estate;
- The
account number, or certificate number, sought to be transferred and the
balance on deposit or the maturity value as of the date of death.
- The
bank is required to retain the same control over the substituted account
as the original account until the New Jersey Inheritance Tax and the New
Jersey Estate Tax are provided for and paid.
- Transfers
from one fiduciary to another Bonds or stock of a New Jersey corporation
or a national bank located in New Jersey, or any money deposited in any
trust company, bank or other institution in the name of one
court-appointed fiduciary as executor, administrator, trustee or guardian,
may, upon the death of such fiduciary, be transferred without a tax waiver
to, or on the order of, the legally appointed substitute for the deceased
fiduciary.
- Transfer
from joint fiduciaries to successors Bonds or stock of a New Jersey
corporation or a national bank located in New Jersey or any money
deposited in any trust company, bank or other institution in the names of
two or more fiduciaries as executors, administrators, trustees or
guardians, may, upon the death of one or more of such fiduciaries be
transferred without a tax waiver, to, or on the order of, the surviving
fiduciary or fiduciaries.
- Transfer
of partnership interest A tax waiver is not required for the transfer of
real or personal property, tangible or intangible, owned by a bona fide
partnership in which a decedent had an interest.
- Transfer
of assets held by nonresident custodian: A tax waiver is not required in
order to transfer any assets held by a nonresident custodian on behalf of
a resident or nonresident decedent.
- Transfer
of tangible or intangible personal property
- A
waiver is not required in order to transfer all other tangible or
intangible personal property, including but not limited to:
- Wages;
- Salaries;
- Vacation
and sick leave pay;
- Payment
under pension, profit sharing, bonus plans or stock purchase plans;
- All
automobiles;
- Mortgages;
- Accounts
receivable;
- Household
goods;
- Personal
effects;
- Funds
held in an account in the name of a funeral director in trust for a
decedent in accordance with the provisions of N.J.S.A. 2A:102-13
(advance funeral payment); Funds to a decedent's credit in a credit
union plan organized under N.J.S.A. 17:13-26 et seq. in addition to any
matching sums paid under any type of credit union plan in the form of a
life insurance where said matching sum is directed to be paid to a
decedent's estate or his or her executor or administrator. However,
funds held under the Federal Credit Union Act must be reported and a
waiver obtained.
- All
property, including property that can be transferred without a waiver,
must, nevertheless, be reported on a decedent's Inheritance or Estate Tax
return.
- Blanket
waiver
- A
banking institution, trust company or safe deposit company organized
under the laws of this State, a national bank operating in this State, a
building and loan or savings and loan association organized in this
State, a credit union chartered by the United States and operating in
this State, a corporation or person may release without a tax waiver any
amount up to 50 percent of the entire amount of funds on hand to any of
the following:
- An
executor;
- Administrator;
- Legal
representative of the decedent;
- Surviving
joint tenant;
- Cestui
que trust; or
- The
estate of a minor where title to said funds are held in the name of a
custodian for said minor without the written consent of the Director,
upon the application of such proper party to the institution, association,
organization, corporation or person above mentioned.
- This
section applies to each institution, association or organization,
corporation or person listed above with whom a decedent has any funds on
deposit, including Certificates of Deposit, and is limited to no more
than 50 percent of the funds in the entire account whether such account
is held in the decedent's name only or jointly with another so that where
the decedent holds an account jointly, only one half of the funds may be
released, not the half claimed by the joint owner and an additional half
of the funds belonging to the decedent.
- In
addition to the amount permitted to be released by an institution,
association, organization, corporation or person above mentioned,
institutions, associations, organizations, corporations, or persons may,
without written consent of the Director:
- Pay
any and all checks drawn on any account owned by a decedent
individually, jointly, or otherwise, when said checks are issued prior
to death and presented for payment within 10 days following the
decedent's date of death; except that in the event an executor,
administrator, or other proper party above mentioned in this section
shall apply for a release of 50 percent of the funds on deposit after 10
days from the decedent's death, the institution, association,
organization, corporation, or person mentioned in this section holding
the funds shall, after having deducted the amount of any checks issued
prior to and presented for payment within 10 days of the decedent's death,
release 50 percent of the balance in a decedent's account to the proper
party upon application and without the written consent of the Director;
- Pay
any checks in any amount for which there are sufficient funds held in
deposit, drawn on any account owned by a decedent individually, jointly
or otherwise, representing full or partial payment of any New Jersey
Inheritance or Estate Taxes and made payable to New Jersey Inheritance
and Estate Tax;
- Liquidate
the loan of any decedent who has pledged the pass book representing a
savings account as collateral for a loan, where upon the death of such a
decedent the loan is in default and then make 50 percent of the
remaining funds available under the blanket waiver; but
- Securities
of a New Jersey Corporation registered in the name of a decedent and
issued by any bank, or savings and loan association situated in this
State, are not subject to the Blanket Waiver rule provided for in this
section. Therefore, the written consent of the Director must be obtained
in order to transfer or release such assets.
- The
Director reserves the right to direct at any time that any sum or sums
not yet paid over shall be withheld by the informant pending further
order of the Director where that course is deemed imperative to protect
the interest of the State.
- Funds
held in a banking institution A banking institution, trust company or safe
deposit company organized under the laws of the State of New Jersey,
national bank operating in the State of New Jersey, building and loan or
savings and loan association organized under the laws of the State of New
Jersey, a credit union chartered by the United States operating in the
State of New Jersey, or a corporation, or a person may, without a tax
waiver, release or Transfer assets held by a decedent as custodian for a
minor pursuant to N.J.S.A. 46:38-1 et seq. or as rental
security deposits under the provisions of N.J.S.A. 47:8-19
et seq.
- Funds
held in bank accounts Where funds are held on deposit in any bank to the
credit of a person and payable on the death of such person to a named
beneficiary, upon the death of the named beneficiary, no tax waiver is
required to transfer or release the funds to such person. However, a tax
waiver is required to transfer or release such funds to the beneficiary upon
the death of the principal.
- Transfer
of collateral A State bank, state banking association, trust company,
national bank, national banking association, safe deposit company or other
institution, having in its possession, custody or control, securities or other
assets pledged as collateral for a loan of a decedent, may, for the
purpose of liquidating a loan or other debt due from a resident decedent:
- Transfer
such collateral from the name of the decedent to its own name upon
receiving the written consent of the director; or
- Sell
such collateral to satisfy a loan of a decedent without the written
consent of the director, except that where the collateral pledged
consists of the stock of a New Jersey corporation, such stock cannot be
transferred on the books of such corporation without the written consent
of the director. If any excess monies are received from a sale, the
written consent of the Director must be obtained before delivery of such
excess money to a proper party in interest; or
- Deliver
any collateral to the executor or administrator of a decedent upon the
full payment of the loan or debt without the written consent of the
director.
- Release of Safe Deposit Box
Contents : N.J.S.A. 54:35-19 provides
that the contents of a safe deposit box standing in the name of a decedent
either individually, jointly or otherwise may not be released without at
least a 10-day notice to the Director of the intended delivery and the
retention of sufficient assets to pay any tax and interest which may be
assessed on the assets. The statute provides that the Director may examine
the decedent's assets contained in a safe deposit box. On December 13,
2016, the Director re-issued the blanket waiver originally issued in 1992
authorizing the immediate release of the contents of a safe deposit box.
The waiver is effective for the period from January 1, 2017, to January 1,
2022.
At the end of the day, be sure to obtain competent legal advice in connection with the Transfer Inheritance Tax and its impact on the sale of real property and the transfer of other assets.
For your real estate purchase or mortgage refinance or
if you have questions about what you see here, contact
Stephen M. Flatow, Esq.
Vested Land Services LLC
165 Passaic Avenue, Suite 101
Fairfield, NJ 07004
Tel 973-808-6130 - Fax 973-227-0645
E-mail sflatow@vested.com
@vestedland
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