Introduction
In addition to the Federal estate tax, New Jersey residents need to be concerned with the New Jersey inheritance tax.
Immediately below is an explanation of the rates of tax. Further below is information regarding administrative procedures.
Tax Rates
Spouse, child, grandchild or parent. Any inheritance passing to a spouse, child, grandchild or parent is completely exempt from the New Jersey inheritance tax. These persons are considered "Class A" beneficiaries.
Siblings. Inheritances passing to a brother or sister are exempt for the first $25,000 to each such brother or sister. These persons are considered "Class C" beneficiaries. Thereafter, a tax of 11 percent is imposed. After the total amount exceeds $1.1 million, the tax is 13 percent.
Charities. Anything left to a charity is exempt from New Jersey inheritance tax. Charities are considered "Class E" beneficiaries.
All others. All other relatives, or to non-related persons are considered "Class D" beneficiaries, and their inheritances will be subject to a New Jersey tax of at least fifteen percent. If the value of the inheritance is less than $100, no tax will be due. However, for inheritances worth more than $100, there is no exemption.
Procedures
Tax Liens. New Jersey law imposes a lien on any bank accounts or real estate owned by the deceased person, and the lien is only lifted once a clearance is received from the State.
A bank in New Jersey will allow an executor or administrator to remove only 50 percent of the value of the bank account on the date of death. The balance will remain in the bank and subject to the lien. The lien can be lifted in one of two ways. The first is that if the entire estate is to pass to persons who are Class A beneficiaries, then the bank will allow the executor or administrator to sign an affidavit right at the bank, and the bank will release all the funds without an instruction from the State. The second means is that the executor or administrator will have to file a Form IT-R with the State, pay any tax due, and when the State is satisfied that all the tax and interest has been paid, the State will issue a waiver, which the executor or administrator can take to the bank to receive the balance of the funds.
Forms. The State of New Jersey makes forms available on-line at http://www.state.nj.us/treasury/taxation/taxprnt.htm.