The State of New Jersey imposes an inheritance transfer tax on property with a total value of $500 or more that passes from the decedent to a beneficiary. This is a tax that is applied to the beneficiaries of the estate. It differs from the federal and New Jersey estate taxes that apply to the value of the land. The estate tax is paid from the assets in the estate before the assets are distributed to the beneficiaries. exemption and tax Rates
New Jersey inheritance transfer tax is taxed at rates ranging from 11% to 16% depending on the different groups or classes of beneficiaries. Each type of benefit has its own exemption amount and tax rate.
There are various persons related to the deceased who are completely exempt from this transfer tax. They include a surviving spouse or domestic, deceased parents, grandchildren, children, adopted children, stepchildren and grandchildren. . When the death of the deceased occurs on or after February 19, 2007, the property passing to the surviving civil spouse is also completely exempt from taxation.
Another type of benefit includes other Bergen County These beneficiaries are allowed an exemption of $25,000. The balance of their estate is taxed at 11% for the next $1,075,000 and thereafter in amounts from 13% to 16%.
All other benefits that are not in the groups described above are taxed at 15% for the first $700,000 and then at 16% for personal transfers with a value above that amount.
Transfers of decedent’s assets that have a value of less than $500 are exempt. In addition, no New Jersey estate transfer tax is due on money or the value of property that leaves the deceased to a charity, educational institution, church, hospital, library, or part of the State of New Jersey or its state.
Exempt and taxable properties
Since the decedent was a resident of New Jersey, taxable estate transfers include all real or tangible personal property located in New Jersey or intangible personal property wherever located. If the decedent was not a resident of New Jersey, the taxable transfers include real or tangible personal property located in New Jersey. Real and personal property located in another state would not be taxable, and the personal property of a non-resident person, wherever located, may not be taxable.
There are certain types of transfers that are specifically exempt from the New Jersey inheritance tax. As on the site of Kenneth Vercammen & Partners, trustees in New Jersey, the transfer of real and personal property held in New Jersey by a husband and wife held jointly by the surviving spouse is not subject to New Jersey inheritance tax. Intangible personal property such as stocks, bonds, securities, and bank deposits are subject to inheritance tax if the decedent was a resident of New Jersey, but not when he or she was a nonresident.
Life insurance proceeds of a decedent, whether a resident or nonresident of New Jersey, that are paid directly to named beneficiaries, and not to the decedent’s estate, are exempt from New Jersey inheritance tax. Life insurance proceeds are also exempt if they are paid to the trustee during the life of the decedent on behalf of the beneficiaries.
Payments from the New Jersey Public Employees’ Retirement System, New Jersey Teachers Pension and Annuity Fund and the New Jersey Police and Fireman’s Retirement System; federal civil service retirement benefits to be provided to non-hereditary beneficiaries; and exempt annuities paid to surviving military retirees.
Death benefits paid by the Social Security Administration or the Railroad Retirement Board to a surviving spouse are exempt from New Jersey estate tax. An exemption is also provided for payments to the surviving spouse of the deceased from a pension, annuity or retirement plan. with their own employer, the plans are considered qualified under the Internal Revenue Code.
According to the New Jersey Treasury, many times when all the decedent’s property passes to beneficiaries who are exempt from inheritance tax (survivors, spouse, domestic partner, partnership civil, partner, children, stepchildren, parents, grandparents, or grandchildren), it is not necessary to take inheritance tax income.
In these cases, Form L-8 can be used for bank accounts, stocks, bonds, and brokerage reasons Form L-8 is a self-executing waiver and is filed with banking institutions or brokers. Form L-9 can be used to release a state lien on real property. Form L-9 is a real Public Property return that is filed with the Individual Tax Audit Branch – Inheritance and Estate Tax office in Trenton , New Jersey. These forms can be downloaded from the New Jersey State Treasury at www.state.nj.us/treasury/taxation.
If there are beneficiaries subject to inheritance tax and inheritance tax return must be filed, form IT-R must be used for the deceased who New Jersey residents and form IT-NR for non-resident decedents. An inheritance tax must be filed and the tax paid within eight months of the deceased’s death. The balance of the tax due after that time is subject to interest.
Certain assets, such as real estate, stocks and bank accounts, require written consent from the Director of the New Jersey Division of Taxation before can be transferred This agreement, known as a waiver, applies when the forms L-8 and L-9 described above are not valid. These waivers will not be granted until the inheritance has been paid. Generally, waivers are not required to transfer cars, furniture, personal effects, and most useful benefits.
Banks and financial institutions may charge up to 50% of any bank account, certificate of deposit, or other surviving account, if the account is shared, or to the executor or administrator of the fund, under the waiver clause. Blanket rejection of accounts with strings and bonds does not apply to brokerages.
According to the Bergen County Surrogate’s Court, when the assets of the estate are distributed, the executor will have the beneficiaries sign a refunding bond and release. By signing a refunding bond, the beneficiary agrees to return part or all of the assets in the unlikely event that they are later needed to pay the estate’s debts. A release absolves the executor from all liability and allows the estate to be closed.
Sources:
Bergen County Surrogate’s Court Transfer of estate taxes: www.co.bergen.nj.us
Kenneth Vercammen & Partners – New Jersey Transfer of Inheritance Tax: www.njlaws.com
Middlesex County – Surrogate – Taxes: www.co.middlesex.nj.us
State of New Jersey – Treasury – Inheritance and Estate Tax: www.state.nj.us
Report:
- Bergen County Surrogate’s Court – Transfer of Inheritance Tax: www.co.bergen.nj. us
