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Inheritance and Estate Tax Definitions

Beneficiary:  A person who shares in a decedent’s estate.

Civil Union:  A union, usually between members of the same sex, which allows for legal benefits, protections and responsibilities similar to a marriage. For more information, see the Civil Union Act.

Decedent:  A person who has died.

Descendant:  A person who is a lineal relative of another person (i.e. – child, grandchild, great-grandchild, etc.)

Disclaimer:  A legally executed document in which beneficiaries give up their right to inherit from a decedent.  When assets are disclaimed by a beneficiary, the assets are then distributed as if the beneficiary had predeceased the decedent.  The disclaiming beneficiary has no rights as to how the assets are then distributed (i.e. – one cannot disclaim “in favor” of another person).

Domestic partner:  A domestic partnership is established when both persons have a common residence and are jointly responsible for each other's common welfare as evidenced by joint financial arrangements or joint ownership of real or personal property. For more information, see the Domestic Partnership Act.

Domiciled:  The place that a decedent considered to be his or her permanent home and the place where he or she intended to return after any period of absence.  For Inheritance Tax purposes, this generally refers to the state in which the decedent lived.

Exempt Organizations:
"Class E transferee" means any of the following:

  • The State of New Jersey or any political subdivision thereof;
  • Any educational institution, church, hospital, orphan asylum, public library or Bible and tract society or to, for the use of or in trust for any institution or organization organized and operated exclusively for religious, charitable, benevolent, scientific, literary or education purposes, including any institution instructing the blind in the use of dogs as guides, no part of the net earnings of which inures to the benefit of any private stockholder or other individual or corporation; provided, that the exemption does not extend to transfers of property to such education institutions and organizations of other states, the District of Columbia, territories and foreign countries which do not grant an equal and like exemption of transfers of property for the benefit of such institutions and organizations of this State.

Form 706 Method (Column B on Form IT-Estate):
For resident decedents dying before January 1, 2017

A filing method that uses the Federal Form 706 as it existed in 2001 to report the assets and liabilities of the decedent, and to arrive at a net taxable estate in order to compute the maximum State death tax credit allowable under the IRS Code as it existed at that time.

This method must be used if the estate is required to file a Federal Estate Tax return, if there are QTIP’s, QDOT’s or other trusts, if there are Adjusted Taxable Gifts, or if an Alternate Valuation Date is being used.    

Heir-at-law:  A person legally entitled to inherit some or all of the decedent’s estate.  

Intangible personal property:  Property which does not have a physical form.  Such property is often represented by a paper certificate or statement (i.e. – stocks, bonds, bank accounts, etc.).

Joint Tenant (Or “joint tenant with right of survivorship”):  Someone who owns property with another person or persons. To be considered jointly held, the property must be designated with “and” or “or” and would not include the words “tenants-in-common.” (For example:  “John Smith and Mary Smith” or “John Smith or Mary Smith as joint tenants” would be considered jointly held.)  Joint tenants would have absolute right to the entire property should they survive the other joint tenant(s).

Lien:  A lien is a legal hold placed on property as security for payment of money owed.  For Inheritance and Estate Tax purposes, the lien does not allow any New Jersey real property or intangible personal property to be transferred to a beneficiary or the estate until it is released by the State.

Mutually Acknowledged Child:  A person who had maintained a child-parent relationship with another person (usually a non-relative or indirect relative) beginning before the child’s 15th birthday and continuing for at least 10 years.  Such a relationship, when proven according to criteria established by the courts, entitles the person to be treated as a Class A beneficiary for Inheritance Tax purposes only.  

Real property:  Commonly called “real estate”, this refers to land and/or physical buildings that are permanent structures attached to land.

Simplified Tax Method (Column A on Form IT-Estate):
For resident decedents dying before January 1, 2017

An alternative New Jersey Estate Tax filing method which primarily uses the New Jersey Inheritance Tax Resident Return (Form IT-R) to report the assets and liabilities of the decedent. This method allows the estate to forego completing the 2001 Form 706 as required under the Form 706 Method.  The net estate from the Form IT-R, plus certain assets that have to be added back (i.e. – assets which are not included for Inheritance Tax purposes, but are includible for the Estate Tax – such as life insurance payable to a named beneficiary), is used to compute the NJ Estate tax. 

This method may only be used if it produces a similar tax amount to the Form 706 Method (Column B) and may not be used if the estate is required to file a Federal 706 with the IRS.

Tangible personal property:  Personal property having physical form. (i.e. – automobile, boat, furniture, jewelry, etc.)

Tenants-in-Common:  Property (usually real property) held by two or more people, each with a separate share of the property and no rights to the others’ share(s). This is most commonly phrased as “John Smith and Mary Smith as tenants-in-common.”

Transferee:  A person to whom assets are or have been transferred.

Transfers:

  • During Decedent’s Lifetime:  When property owned by the decedent is transferred during the 3 year period prior to the decedent’s date of death, and the decedent did not receive the total (actual) fair market value of the property in money or money’s worth, or when property owned by the decedent is transferred but the decedent retained a right in the property for his/her lifetime.
     
  • Taking effect at or after death:  This commonly refers to an asset with a designated beneficiary, which automatically transfers to that beneficiary upon the original owners’ death.  The beneficiary would have had no right or interest in the asset until the death of the owner. Some common examples would be annuities, IRAs, or pension death benefits. 

Waivers:

  • Form O-1
    This tax waiver is a form issued by the Division that releases both the Inheritance Tax and the Estate Tax lien and permits the transfer or release of property for both Inheritance and Estate tax purposes. To receive this waiver, you must file an Inheritance and/or Estate Tax return or Form L-9 or Form L-9NR and pay all taxes due.

  • Form L-8 (Affidavit & Self-Executing Waiver)
    This form may be used in most cases to transfer bank accounts, stocks, bonds and brokerage accounts, when the transfer or release is to a Class “A” beneficiary.  You must file this form directly with each bank, financial institution, broker or transfer agent holding the assets. Form L-8 is used instead of a tax waiver (Form O-1).

However, the Form L-8 cannot be used for:

  • The transfer of real estate

Or

  • Decedents who died after 12/31/01, but before 01/01/17 with a taxable estate plus adjusted taxable gifts that exceed $675,000 for Federal Estate Tax purposes under the provisions of the Internal Revenue Code in effect on 12/31/01.

  • Decedents who died on or after 01/01/17, but before 01/01/18 with a taxable estate that exceeds $2 million for Federal Estate Tax purposes under the provisions of the Internal Revenue Code in effect on January 1, 2017.
NOTE: If you are qualified and use Form L-8, you will not need or receive a waiver (Form O-1) from the Division.
  • Blanket Waiver
    Whether or not a return has been filed or Form 0-1 waivers have been issued, banks or other financial institutions are allowed to release up to 50% of the funds on hand to the estate representative or joint owner of an account at any time.  The remaining funds must be kept by the bank until a valid waiver or Form L-8 is received.

    Banks are also required to honor any request by the estate representative or joint owner of an account to issue a check(s) made out to “New Jersey Inheritance and Estate Tax” for the tax payment (as long as the funds are available in the account). No waiver is required for this.


Last Updated: Monday, 09/18/17



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