Tax Waiver Requirements
Tax waivers (Form 0-1) are required to transfer assets from a decedent's name to a beneficiary. Such assets can include:
- 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.
A summary of the laws that require the waiver are as follows:
Inheritance Tax (N.J.S.A. 54:35-5, N.J.S.A. 54:35-19)
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.
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.
Estate Tax (N.J.S.A. 54:38-6)
The New Jersey Estate Tax is a lien on all property of a decedent as of their date of death. The tax applies to all decedents who died after December 31, 2001, but before January 1, 2018. The law requires written consent (i.e., a tax waiver) from the Director, before transferring property owned by a decedent as of their date of death to a beneficiary. No Estate Tax was imposed for decedents who died after January 1, 2018.
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.
For full details, refer to N.J.A.C. 18:26-11.1 - 11.25 "Waivers – Consent to Transfer."
How to Obtain a Waiver
Waivers (Form 0-1) can only be issued by the Inheritance Tax Branch of the NJ Division of Taxation. It is not a form you can obtain online or fill out yourself. In most circumstances, some kind of return or form must be filed with the Division in order to have a waiver issued.
Information on obtaining waivers and filing requirements is available for executors or administrators of estates .
Form L-8 (self-executing waiver for certain Class A beneficiaries ) can be substituted for Form 0-1 to obtain the release of financial (non-real estate) assets. An L-8 is valid only when the form is properly executed and used by or for the Class A beneficiaries indicated on the form.
Specific Waiver Situations:
- Individual Retirement Accounts (IRA's): A waiver is required to transfer any IRA that is held in a bank or other financial institution which would otherwise require a waiver. IRA's in the form of an annuity administered by an insurance company do not require waivers.
- Brokerage Accounts: Waivers will be issued only for the total date of death value of the account. No waivers will be issued for individual securities held within a brokerage account. See "Brokerage Account" tab for further details.
- Qualified Tuition Programs (529 Plans): Waivers are required to transfer any 529 Tuition Program in which the funds are held in a financial institution which would otherwise require a waiver.
Blanket Waiver – provides for the release of certain funds from banks without a waiver.
- Authorized parties: An institution, association, organization, corporation, or person holding a decedent's funds may release up to 50 percent of the entire amount of funds on hand, without a waiver, to any of the following:
- An executor;
- Legal representative of the decedent;
- Surviving joint tenant;
- Cestui que trust; or
- The estate of a minor in which title to funds are held in the name of a custodian for the minor.
- 50% of funds provision: The Blanket Waiver is limited to no more than 50 percent of the total funds in the entire account, whether the account is held in the decedent's name only or jointly with another.
- Payment of tax: In addition to the amount permitted to be released by financial services firms under the above, institutions may honor any checks made payable to New Jersey Inheritance and/or Estate Tax without written consent of the Director. Payment can be in any amount for which there are sufficient funds held on deposit in any account owned by a decedent or their estate.
- Payment of checks issued prior to death: When a check written by a decedent prior to their death is presented to a bank within 10 days of the decedent's date of death, the bank may honor the check. These payments can then be deducted before calculating 50% of the funds available for release under the Blanket Waiver provisions.
- Stock exception: 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 all such assets.
- Informant provision: The Director reserves the right to require the informant (the person who provides information about the decedent) to withhold any amount not yet distributed, pending further order of the Director.
Transfers permitted by banks and financial services institutions prior to receiving a tax waiver
Accounts: When making the transfers described below, the bank is required to retain the same control over the substituted account as the original account, until it has received a New Jersey Inheritance and Estate Tax waiver indicating the date of death balance of the original account.
- 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 their 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 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.
Waiver Requirements - Brokerage Accounts
The New Jersey Inheritance Tax and Estate Tax statutes do not allow property owned by, or in the name of, a resident decedent to be transferred without written consent – in the form of a tax waiver – from the Director of the Division of Taxation. A lien remains on the decedent's property until taxes are paid.
An Inheritance/Estate Tax waiver is required to release the funds for all brokerage accounts held – individually or jointly – in a resident decedent's name. This tax waiver is required if the brokerage firm had an office in New Jersey, regardless of where the account was opened.
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.
Under the above circumstances, funds can be released if the executor, administrator, or certain beneficiaries of the estate, provides a properly completed Form L-8 to the brokerage firm. The L-8 form is an affidavit and self-executing tax waiver that is filed directly with the brokerage firm.
Assets are often held in a brokerage account registered in “street name” (i.e., when a brokerage holds a security – on behalf of a client – which is registered in the name of the institution). Those assets may be bought and sold within the account without first obtaining a tax waiver. However, until a tax waiver is obtained, these assets may not be transferred or released to the estate or beneficiaries, other than those permitted by the blanket waiver provisions of N.J.A.C. 18:26-11.16.
All blanket waiver provisions are applicable to brokerage accounts. The brokerage institution must retain assets worth half the value of an account on the decedent's date of death. The retained assets may not be released without a tax waiver. The institution may release whatever assets remain in the account, without a tax waiver, to:
- An executor;
- Legal representative of the decedent;
- Surviving joint tenant;
- Cestui que trust (the beneficiary of a trust); or
- The estate of a minor, when the account is titled in the name of a custodian for the minor.
A decedent's brokerage account held 1,000 shares of XYZ Corporation stock valued at $100,000 on the date of death:
- If, three months after the decedent's death, the account is valued at $200,000, assets valued at $150,000 may be released without a tax waiver. Assets valued at $50,000 must be retained pending receipt of a tax waiver;
- If, three months after the decedent's death, the account is valued at $60,000, assets worth $10,000 may be released without a tax waiver. Assets valued at $50,000 must be retained pending receipt of a tax waiver;
- If, three months after the decedent's death, the account is valued at $40,000, no assets may be released without a tax waiver.
The provisions of N.J.A.C. 18:26-11.8 also apply to brokerage accounts. Specifically, funds held in a decedent's Individual Retirement Account (IRA) may be transferred to another account within the same institution (such as an inherited IRA) without obtaining a waiver.
Additionally, all – or any part – of the assets held in a decedent's brokerage account may be moved to an estate account within the same institution. Until a waiver for the original account is received, the institution is required to retain the same control over the substituted account as it had over the original account.
Guidance on this matter was originally provided in the New Jersey State Tax News, Volume 35, Fall/Winter 2006.
Tax waivers are not required for:
- Real property held as tenancy by the entirety: Real property held by a husband and wife or civil union partners as tenants by the entirety is not considered a transfer to the surviving spouse or civil union partner. Therefore, a waiver is not necessary.
- Non-resident decedents (bank accounts): Inheritance Tax and Estate Tax waivers are not required for intangible assets of a non-resident decedent.
- Waivers are required for real property located in New Jersey which was owned by a non-resident decedent (except as in #1 above).
- Assets held in trusts: The transfer of any asset, whether real or intangible, held in the name of a bona fide trust as of the date of a decedent's death, does not require a tax waiver.
- Stock shares of a Non-New Jersey Corporation: The transfer of shares of stock owned by a decedent in a corporation which is incorporated in a state other than New Jersey, does not require waivers.
- 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.
- Assets owned by LLC's or Closely Held Corporations: A tax waiver is not required for the transfer of real or personal property, tangible or intangible, owned by a Limited Liability Corporation or Closely Held Corporation, even if the decedent owned all shares of the corporation.
- Note: Waivers may be required for the shares of the corporation if it was incorporated in New Jersey.
- Transfer of personal property (tangible or intangible)
- A waiver is not required in order to transfer all other tangible or intangible personal property, including but not limited to:
Property Disclosure: All property of a decedent, including property that can be transferred without a waiver, must, nevertheless, be reported on a decedent's Inheritance or Estate Tax return.
- Wages or salaries;
- US Savings Bonds;
- Vacation and sick leave pay;
- Payment under pension, profit-sharing, bonus plans or stock purchase plans;
- All motor vehicles;
- Accounts receivable;
- Household goods;
- Personal effects, cash, collections, etc.;
- Funds held in an account in the name of a funeral director in trust for a decedent (advance funeral payment);
- Assets held by a decedent as custodian for a minor, held in any financial institution, may be released without a waiver pursuant to N.J.S.A. 46:38-1 et seq.
- Rental security deposits in a decedent's name may be released without a waiver under the provisions of N.J.S.A. 47:8-19 et seq.
- Payable-on-Death (POD) Bank accounts when beneficiary dies first: When the named beneficiary of a "payable on death" account dies before the principal owner of the account, no tax waiver is required in order for the surviving owner of the account to access or transfer the funds.
- Note: A tax waiver is required to transfer or release such an account to the beneficiary should the principal owner die first.
- Transfer of collateral: A New Jersey banking, or financial services institution, that has in its possession, custody, or control, any securities or other assets pledged as collateral for a loan of a decedent, can liquidate a loan or other debt due from a resident decedent by:
- (Waiver required) Transferring such collateral from the name of the decedent to its own name upon receiving the written consent of the Director; or
- (No Waiver required) Selling such collateral to satisfy a loan of a decedent without the written consent of the Director, with two exceptions:
- (Waiver required) When the collateral pledged consists of the stock of a New Jersey corporation; and
- (Waiver required) If any excess monies are received from a sale, a waiver must be obtained before that excess money can be delivered to a proper party in interest; or
- (No waiver required) Delivering 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.
- 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 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 fiduciaries be transferred without a tax waiver to the surviving fiduciary or fiduciaries.
- 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.
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