What is Inheritance tax waiver?
What is an Inheritance Tax Waiver
A Tax waiver represents the written consent of the Director of the Division of Taxation to transfer or release certain property in the name of a decedent.
Typically the attorney for the estate will prepare the Inheritance Tax Return
New Jersey property (such as real estate located in NJ, NJ bank and brokerage accounts, stocks of companies incorporated in NJ, and NJ bonds, etc.) cannot be transferred or released without this consent.
A separate waiver will be issued for each titled asset.
Each waiver will contain specific information about the property (such as: bank name, account balances, and names on the account).
The original Waiver on real estate is filed with the County clerk where the property is located. (Typically the Attorney will handle).
Example
Middlesex County Clerk
Re: L-9 Property waiver
Estate of _
Dear Middlesex County Clerk:
Enclosed herewith please find the following:
1- Inheritance Tax Waiver
2- Check for $15.00 for recording payable Middlesex County Clerk
3. Middlesex County Cover Sheet NJSA 46 26A 5
Would you kindly :
[ x ] File and return a filed copy
The original waiver must be filed, not a copy.
More info at https://www.state.nj.us/treasury/taxation/inheritance-estate/inheritance-waivers.shtml
NJ Tax Guide A Guide to Being an Executor
Helpful information from the NJ Division of Taxation.
What if you are an Executor or Administrator of an estate?
You are most likely looking to obtain waivers to release the decedent’s assets, such as NJ bank accounts, NJ stock, and NJ real estate. There are several steps to follow, and a few things you need to know before this can happen.
Typically the attorney for the estate will prepare the Inheritance Tax Return.
What are the different types of waivers?
A self-executing waiver (do-it-yourself) and the 0-1 waiver (issued by the Division of Taxation) are the different types of waivers. New Jersey banks are prohibited from closing a decedent’s bank accounts without one of these forms:
Form L-8 Self-Executing Waiver Affidavitcan only be used when there is no Inheritance or Estate Taxes due (see below).
L-8s are to be filled out by you, as the estate representative. Then they can be sent or brought directly to the bank, transfer agent, or other financial institutions holding the funds.
Many banks have these forms on hand, but they can also be obtained on our website.
o You do not file anything with the Inheritance and Estate Tax Branch if you qualify to use this form.
Form 0-1 is a “waiver” that can only be issued by the Division of Taxation.
o To get this form, you must file a return with the Division.
o Real Estate transfers always require Form 0-1.
o Note: 0-1 is not a form that you will be able to find on our website. This form can only be issued by the Division of Taxation.
The original Waiver on real estate is filed with the County clerk. (Typically the Attorney will handle)
Are there any Inheritance or Estate Taxes Due?
Your next job as Executor/Administrator is to figure out if any Inheritance or Estate taxes will be due. This will determine what forms or returns you will need to file.
Besides the Federal estate tax, there are two separate State taxes related to a person’s death: the Inheritance Tax and the Estate Tax. You may owe one, but not the other. You will never pay more than the higher of the two taxes:
Inheritance Tax mainly depends on the relationship between the deceased person and the beneficiary. Estate proceeds payable to:
Surviving spouses, parents, children, grandchildren, etc. are exempt from Inheritance Tax. These are Class A beneficiaries.
Brothers and sisters and children-in-law are subject to tax after built-in exemptions. These are Class C beneficiaries.
Nieces, nephews, aunts, uncles, friends, and non-relatives are subject to Inheritance Tax. These are Class D beneficiaries.
Charitable institutions are exempt from Inheritance Tax. These are Class E beneficiaries.
If it turns out that Inheritance Tax may be due, the Inheritance Tax Resident Return (Form IT-R) needs to be filed. Any tax must be paid within eight months after the date of death or you will incur a 10% annual interest charge on unpaid tax.
Sometimes, a return needs to be filed even if there might not be any tax due. If there are any Class C, D, or E beneficiaries, you will need to file a full return. .
Form L-9: Resident Decedent Affidavit Requesting Real Property Tax Waiver. This Form needs to be filed with the Inheritance & Estate Tax Branch to receive a Form 0-1 Waiver for real estate.
Non-Resident Decedents (someone who died as a legal resident of another state or a foreign
country): People who did not live in New Jersey, but owned certain types of property in New Jersey (usually real estate) may need to pay NJ Non-Resident Inheritance Tax. See New Jersey Non-Resident Inheritance Tax Frequently Asked Questions for more information. There is no Estate Tax on non-resident decedents.
Other Important information for executors/administrators to know:
Banks and financial institutions may release up to 50% of the entire amount of funds on hand before a waiver is received. These funds may only go to the executor or administrator or joint owner of the account(s).
Banks also must pay (without a waiver) any checks for Inheritance/Estate Taxes written to New Jersey Inheritance and Estate Tax from a decedent’s account (if there are sufficient funds in the account, of course.)
When filing any return for Inheritance Tax, the fair market value of decedent’s assets should be reported as of the date of death, not as of the filing date.
How long does processing take?
Once you have filed a return with the Division, please plan for processing to take at least several months. If a return must be audited, it may take several months longer. About 40 to 50% of returns require additional attention in the form of an audit. Returns are processed and audited in the order they are received.
Inheritance and Estate Tax payments are usually posted within two weeks from the time they are received, but the processing of a return and issuing of waivers will take longer.
Full details regarding the above information are available on our website or by calling the Inheritance and Estate Tax Hotline at 609-292-5033 M-F 8:30 a.m.- 4:30 p.m. EST.
As executor, you may be required to file income tax returns on behalf of the decedent.
YEAR OF DEATH | EXEMPTION LEVEL | RETURN REQUIRED |
2016 or earlier | $675,000 including adjusted taxable gifts | IT-Estate |
2017 | $2 million | IT-Estate 2017 |
2018 or after | All exempt | No Estate Tax return |
Source https://www.state.nj.us/treasury/taxation/documents/pdf/guides/General-%20Guide-to-Being-an-Executor
