As many of you know, New Jersey recently revised its estate tax law.
Effective January 1, 2017, people who die in the year 2017 will have a New Jersey estate tax exemption of $2,000,000. Since the law was enacted towards the end of 2016, the division of tax needs some time to prepare a new estate tax return form.
Unfortunately, if you are the executor or an administrator of an estate, and the estate is in excess of $2,000,000, you will not be able to file an estate tax return until the State of New Jersey provides guidance on the type of information they will need in order to issue Tax Waivers. Inevitably, this will lead to a delay in getting access to funds.
If you are an executor trying to access funds from a financial institution, remember, the financial institution is required to release one-half of the funds. We have heard a few horror stories recently about banks not doing this. If this happens to you, please refer them to this notice from New Jersey. You will see in the section titled “Blanket waiver” that the bank may release 50% of the funds without a tax waiver.
Note, New Jersey has released Form L-8 and Form L-9 so that decedents who are leaving everything to Class A beneficiaries and charities and who have a taxable estate under $2,000,000 can access their accounts completely and apply for a tax waiver for any real estate owned. (Thanks to the head of my estate administration department, Elizabeth Ketterson, for the reminder.)
This can be tricky when a decedent wants to give a token gift to a niece, nephew, godchild, step-grandchildren or friend. Any bequest of more than $500 means that the Executor of the estate cannot use Form L-9 or L-8 to have more than 50% of the funds released as an inheritance tax will result and New Jersey will have an automatic lien on all New Jersey accounts and property.