Name: Ravenell Law
Address: 8033 Old York Road, Ste 206, Elkins Park, PA, 19027, US
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New Jersey has no estate tax for deaths on or after January 1, 2018. It still has an inheritance tax. Whether anyone owes it depends mostly on who inherits, not on how large the estate is.

A house left to a daughter is usually untaxed. The same house left to a niece can owe 15 percent. That is why the first question in a New Jersey administration is not how much there was, but who gets it.

Who pays: the beneficiary classes

The Division of Taxation sorts every beneficiary into a class. The class sets the rate.

Class A, no tax: spouse, civil union partner, registered domestic partner, child (including a legally adopted child), grandchild and other lineal descendants, stepchild, parent, and grandparent. A step-grandchild is not Class A.

Class C: brother or sister, the spouse or surviving spouse of a child, and the civil union partner of a child.

Class D: everyone not in another class. That includes nieces, nephews, cousins, friends, and partners who were never married, in a civil union, or registered as domestic partners.

Class E, no tax: qualified charities, religious, educational and medical institutions, and the State of New Jersey and its political subdivisions.

The rates, as the Division publishes them

Class C: the first $25,000 is untaxed, the next $1,075,000 is taxed at 11 percent, the next $300,000 at 13 percent, the next $300,000 at 14 percent, and anything over $1,700,000 at 16 percent.

Class D: 15 percent on the first $700,000 and 16 percent above that.

The rates apply to what each beneficiary actually receives, after allowable debts and expenses. Valuation and deductions are where returns go wrong. Do not run the math off a gross bank statement.

The 8-month deadline

If a return is required, it has to be filed, and any tax paid, within eight months of the date of death. Unpaid tax accrues interest at 10 percent a year after that. You can ask for more time to file the return (Form IT-EXT). There is no extension of time to pay.

Families with ties to both states should notice the difference. Pennsylvania's inheritance tax is delinquent at nine months and gives a 5 percent discount for paying within three. New Jersey runs on eight months, charges interest, and gives no discount. Different state, different calendar.

Why the bank froze the account: tax waivers

New Jersey inheritance tax is a lien on everything the decedent owned at death, for 15 years, unless the tax is paid or secured first. Because of that lien, banks, brokerages, and title companies generally need written consent from the Division, called a tax waiver (Form 0-1), before they hand a resident decedent's assets to a beneficiary.

That covers New Jersey real estate, money in New Jersey financial institutions, brokerage accounts doing business in New Jersey, and stock or bonds of a New Jersey company. You cannot download a 0-1 or fill one out yourself. Only the Division's Inheritance Tax Branch issues it, and usually only after a return or form has been filed.

L-8 and L-9: the shortcuts for Class A families

Form IT-L-8, the self-executing waiver. When no return is required and the beneficiaries are Class A, an L-8 can go directly to each bank or brokerage for accounts, stocks, and bonds. It does not work for real estate, and it is valid only for the Class A beneficiaries named on it.

Form IT-L-9. For a resident decedent's real estate when no return is required, the L-9 is filed with the Division, which then issues the real property waiver. Title companies want that waiver before a sale closes.

If anyone outside Class A shares in the estate, expect a full resident return (Form IT-R) instead of the shortcuts. The Division publishes a flowchart for which form fits which date of death.

The 50 percent rule while you wait

Under the Division's blanket waiver rule, an institution holding the decedent's funds may release up to half of the account, without a waiver, to the executor, the administrator, a surviving joint owner, or another authorized party. The other half waits for the waiver. The 50 percent limit applies to joint accounts too, so joint does not automatically mean free.

Institutions may also honor a check drawn on the account and made payable to NJ Inheritance and Estate Tax, which is one way to pay the tax before the waiver arrives.

What this page is not

Not a nonresident guide. If the decedent lived in Pennsylvania but owned a New Jersey house, nonresident rules and Form IT-L-9 NR apply instead.

Not tax advice for a specific estate. Classes, deductions, and what is taxable turn on facts.

Not about the federal estate tax, which is a separate question for large estates.

Not a substitute for the Surrogate. New Jersey probate runs through the county Surrogate. The inheritance tax runs through the Division in Trenton. Two offices, two sets of paper.

When to call

Call before filing if any beneficiary is outside Class A, if New Jersey real estate is already under contract, if the decedent lived in one state and owned property in the other, or if a bank is holding half an account and nobody can say which form it wants.

Ravenell Law handles New Jersey and Pennsylvania estate administration. William Ravenell reviews administration matters before they go out the door. This page is general information, not legal advice.