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.

The lien is removed in all cases by the issuance by the NJ Division of Taxation of a tax waiver.

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
1. 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.
2. 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.
3. 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.
4. 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.
5. 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
1. 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.
2. 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
1. 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.
2. 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.
3. 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
4. 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.
5. 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:
1. Transfer such collateral from the name of the decedent to its own name upon receiving the written consent of the director; or
2. 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
3. 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.

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

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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Why the Internet is dangerous for research when it comes to property rights

Many questions arise each year regarding the ability of one spouse, who owns the property, to sell without the consent of the other spouse.  Prior to May 28, 1980 the ability to do this was extremely limited by the spousal rights of dower and curtesy. (Space does not permit me to go into detail here.)

 In 1980 the dower and curtesy laws were superseded by a new right called the “right to joint possession of the principal matrimonial residence.”  The statute provides, in part,

“During life every married person shall be entitled to joint possession with his or her spouse of any real property which they occupy jointly as their principal matrimonial residence and to which neither dower nor curtesy applies. One who acquires an estate or interest in real property from a person whose spouse is entitled to joint possession thereof does so subject to such right of possession, unless such right of possession has been released, extinguished or subordinated by such spouse or has been terminated by order or judgment of a court of competent jurisdiction or otherwise.”

 A recent column in the MoneyHelp.com asks “Can my husband sell our home without my permission?”  Here’s the question:

 Q. My husband and I purchased a condo before we got married in 2001 and it was placed in his name only. We got married later that year. Our marriage has been rocky for a while and seems to be getting worse. I found out my husband is trying to sell it and not give me any of the funds acquired. Can he do this? What are my legal rights?

— Worried

 Our take on this is, unfortunately, the answer addresses the wife’s concerns strictly from a property settlement point of view and did not take into account that the soon to be ex-husband cannot sell the home without the spouse’s consent based on the above statute.  It also leaves out some important facts, such as, have the parties separated or are they in the midst of a divorce action?  In the first situation, if the non-owner spouse has abandoned the property, she may have given up her right to joint possession.  In the latter, her attorney should immediately file a Notice of Lis Pendens putting any potential buyer on notice that the wife claims an interest in the property.

 Here’s the full answer to the question posed by the MoneyHelp.com reader:

 A. We’re sorry to hear about this situation.

 New Jersey is an equitable distribution state, which means that marital property is divided equitably upon divorce – or fairly.

 “Marital property” is defined as the assets and debts acquired or earned during the course of the marriage, either individually or jointly, including real property, personal property, retirement accounts and bank accounts, as well as mortgages, loans, revolving debt, and the like, said Jeralyn Lawrence, a family law attorney with Lawrence Law in Watchung.

 She said in New Jersey, property titled in the name of one spouse rather than both spouses is not enough to exclude that property from the proverbial “marital pot.”

 “By virtue of the fact that you and your husband purchased the residence together in contemplation of marriage, with the intent to live together during the marriage and enhance the marital estate, you have both acquired an interest in the marital residence in the form of equity,” she said.

 It’s also important to know the source of funding at the time you and your husband purchased the marital residence and if your name is on any mortgage, she said.

 In the event you contributed toward the purchase of the marital residence or named on the mortgage, these facts only further embolden your claim to the equity in the home, Lawrence said.

 In New Jersey, Courts recognize both financial and non-financial contributions to the upkeep, maintenance and preservation of the home when determining both party’s interest, without placing significant weight on the names in which the deed is recorded, or mortgage is held, she said.

 “Some of these relevant factors considered by the court are contributions to the utilities to maintain the home, whether improvements were made to the home utilizing marital income, whether either you or your spouse invested physical labor into the upkeep of the home, and/or what other marital efforts, if any, caused an increase in the value of the home,” she said. “If you did contribute to these efforts in some capacity, personally or financially, you have grounds to claim a portion of the equity in the residence.”

 So your husband is not entitled to any greater share of the equity in the marital residence simply because he is individually named on the deed, she said. It may be possible for him to list the residence without your consent for that reason, but he is not entitled to retain all the proceeds for the sale without providing you with your share of the equity, she said.

 A court also has the power to restrain him from listing the sale of the home without your participation and consent, Lawrence said.

Because the specifics of your case matter here, you should speak to an experienced family law attorney who can review all the details.

Email your questions to Ask@NJMoneyHelp.com.

 This story was originally published on March 3, 2021.

 NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

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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A question: If I move to Florida, will the N.J. inheritance tax be due?

From NJMoneyHelp.com:

If I move to Florida, will the N.J. inheritance tax be due?

Photo: pixabay.com

---

Q. I’m a New Jersey resident but I plan to move to Florida. I would be a Florida resident but keep both houses. Would any beneficiaries of my estate — residing in New Jersey or otherwise — be subject to the New Jersey inheritance tax?
— Dad

A. Congratulations on your planned move.

It’s complicated.

Assuming you are successful in establishing Florida as your domicile, at the time of your death any real and tangible personal property you own located in New Jersey would be potentially subject to New Jersey inheritance tax, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park.

The residence of the beneficiary is not a factor in determining whether or not New Jersey inheritance tax is incurred, she said.

It’s all based on the relationship of the deceased to the beneficiaries.

She said intangible property, such as bank accounts, would not be taxable.

Assets left to Class A beneficiaries, which include your children — and charities — incur no tax, she said. Class A beneficiaries include a spouse, civil union or domestic partner, parents, grandparents, descendants, stepchildren (but not step-grandchildren), and mutually acknowledged children, she said.

“If the New Jersey real and tangible personal property is specifically bequeathed to Class A beneficiaries, or all of your assets are left to Class A beneficiaries, it is possible to entirely avoid the New Jersey inheritance tax,” she said.

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

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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Buying your dream home? Buy title insurance, too.

Buying Your Dream Home? Protect Your Property with Title Insurance

Purchasing a home is an exciting time for anyone, but that joy can soon fade if problems - such as lost or forged deeds or liens on the property - are revealed. Title insurance can protect buyers.

TOP CONSIDERATIONS

Examples of common title defects:

1. Lost, forged, or incorrectly filed deeds. Deeds are the documents that show who owns the property, and if not filed correctly, can lead to unclear ownership rights. This can include titles filed in the wrong name or titles never filed at all. 
2. Fraud. This can take many forms such as falsified documents making it appear as if a mortgage is paid off.
3. Construction and other liens. Unpaid contractors, homeowner association dues or property taxes can result in liens on the property. 
4. Encroachments. Physical structures, such as a neighbor’s fence, that intrudes on the legal property boundary can create title issues at closing. We always recommend getting a survey before you buy.

Types of title policies: Owner’s and Lender’s are the two primary types of title policies. 

An owner’s policy protects you for the purchase price of your home plus legal costs if a title or ownership issue arises. It is usually issued for the amount you paid for your home and will cover you as long as you own an interest in the property. An owner’s policy is not required but is a good idea to protect your own financial interest in the property. 

A lender’s policy protects the lender, and only the lender, if a title or ownership problem comes up after the property is purchased. Unlike an owner’s policy, the dollar amount that would be paid if there was a problem with the title decreases as you pay off the loan and ends when you pay off your mortgage. A lender’s policy is usually required to get a mortgage loan. 

THINGS YOU SHOULD KNOW

Know who you’re hiring: People often choose a title insurer and/or closing agent based on a referral from their real estate agent, lender, or home builder. Get quotes from multiple companies to ensure you are getting the best price. Check with your state insurance department to make sure the company is licensed to operate in the state. 

Start early: Once you have a signed agreement to purchase real estate, you have all the information you need to start getting title insurance quotes from companies. Start searching early to avoid delaying the closing. The buyer and seller don’t have to select the same title or closing agent so shop around to find the best deal for you. In some locations it is customary for the seller to pay for the lender’s policy, read your real estate contract to find out who is responsible for the title fees. 

Be cautious: Real estate often includes transferring large sums of money between buyers, sellers, banks, and closing agents. As a result, they are also a target for cybercriminals. Call your closing agent and lender right away if someone proposes a change to the payment transfer. Check email addresses closely when transacting business online. Call your closing agent and bank right away if something doesn’t seem right.

After closing, check that the deed was recorded in the county records: You can call your county recorder’s office (in New Jersey it is either the county clerk or register of deeds) or check its website to confirm the deed was recorded properly. Ensure the name and address is correct. If you received a loan to buy the property, check for the mortgage as well which will have the lender’s name and the property address. 

Keep a hard copy of your title policy and closing protection letter in a safe place: Title insurance safeguards your ownership rights for the entire time you own the home or property. You will need the policy documents to submit a claim. Title defects may not be found until you sell a property. 

TOP FOUR THINGS TO REMEMBER

•  A lender’s policy only covers the lender, so to protect your own financial interest, consider purchasing an owner’s policy. 
• Shop around for title insurance, even if you receive a title insurer recommendation from your real estate agent, lender or builder. Only by comparing prices can you ensure you are getting the best deal. 
• Take cybersecurity seriously when communicating transaction details through e-mail and ALWAYS pick up the phone and call the closing agent and lender to verify payment transfer details.
• Keep a copy of your policy in a safe place. You will need this information to file a claim.  

 

(Thanks to our friends at National Association of Insurance Commissioners for this information.)

 

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

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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Vested Land Services Title Topics the Deed in Lieu of Foreclosure

From the Vested Land Services LLC newsletter Title Topics - Deeds in Lieu of Foreclosure

How is the deed in lieu transaction approached by a title agent?  This is from a recent edition of our client newsletter:

 We’ve been asked to insure a title that was obtained by deed in lieu of foreclosure.  Are there any special requirements when insuring a title which was obtained by deed in lieu of foreclosure?

Well, yes, there are. And there are some underlying legal issues, too.

       First, is the creditors’ rights problem.  If we are insuring the grantee under the deed in lieu of foreclosure’s title and we are issuing the ALTA 2006 Owner Policy, the pre-printed Creditors Rights Exclusion will cover this concern and no additional exception need be added; but, if we are using the ALTA 1987 Residential “Plain Language” Policy, we must include the following exception on Schedule B: 

 Consequences of an attack on the estate or interest insured herein under the Federal Bankruptcy Law or any creditors' rights law or state insolvency law. 

        If we are insuring a conveyance by the grantee under the deed in lieu of foreclosure we must run the deed in lieu of foreclosure grantor in upper courts through the date of the insured transaction; if that grantor has filed for bankruptcy protection after the date of the deed in lieu, the stop sign is illuminated and the bankruptcy proceedings have to be reviewed.

      Second, the mortgage for which the deed in lieu of foreclosure was given may remain open until the grantee in the deed in lieu of foreclosure conveys title.  In that subsequent transaction, the mortgage must be cancelled of record.

      Third, we cannot insure a title being conveyed by a deed in lieu of foreclosure which had been previously executed and held in escrow in case of a future default.  Only deeds in lieu of foreclosure which have been currently executed may form the basis for owners’ title coverage in favor of the grantee in the deed in lieu.

      Fourth, the realty transfer fee must be paid upon recording of deed in lieu if the underlying mortgage is not discharged.

*  *  *  *

If you would like to be added to the Title Topics newsletter, please send me an email.

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

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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