Why do I need an Inheritance Tax Waiver in New Jersey?

An inheritance tax waiver in New Jersey is needed when a person inherits property from someone who has died and the value of the inheritance is above a certain threshold. The waiver acts as proof that the inheritance tax has been paid, or that it is not owed, and is required to transfer ownership of the property. Inheritance tax in New Jersey is imposed on transfers of property from a decedent to the heirs, and the amount of the tax depends on the relationship between the decedent and the heir.

The waiver is needed to transfer assets such as:

• New Jersey real property (such as real estate);
• Funds held in New Jersey financial institutions;
• Brokerage accounts doing business in New Jersey;
• Stock or bonds of a company incorporated in New Jersey, or a New Jersey institution.

New Jersey Transfer Inheritance Tax is a Tax Lien

New Jersey Transfer Inheritance Tax is a lien on all property owned by the decedent as of the date of their death for a period of 15 years unless the tax is paid before this or secured by bond. The lien exists whether the tax is levied and assessed or not.

However, funds can be released without a waiver if a brokerage account passes to a decedent’s:

• Surviving spouse/civil union partner or domestic partner;
• Child, stepchild, or legally adopted child;
• Grandchild or great-grandchild, (but not a step-grandchild or a step great-grandchild);
• Parent or grandparent.

The law requires that, with certain exceptions, banking institutions and other institutions, corporations, and persons must receive written consent (i.e., a tax waiver) from the Director of the Division of Taxation before delivering or transferring any assets from a resident decedent to a beneficiary.

There are three (3) different types of tax waivers

• Form 0-1
• Form L-8
• Form L-9

Form 0-1 is issued by the New Jersey Division of Taxation upon acceptance of a New Jersey Inheritance Tax Return. The L-8 is an affidavit and self-executing tax waiver that is filed directly with the brokerage firm. Similarly, a L-9 is an affidavit and self-executing waiver used to transfer real property. Certain conditions must be met before either an L-8 or L-9 can be used, such as asserting that estate assets are for the benefit of Class “A” individuals.

Conclusion

To better understand how these tax waivers work, you should consult with a New Jersey tax attorney familiar with the inheritance tax.