There is growing confusion over when an Executor must obtain a New Jersey Inheritance Tax Waiver to close a bank or investment account. My Executor clients in Hunterdon County are reporting that banks are requiring tax waivers to close or transfer an account. In nearly every case, the bank is incorrect.
What are New Jersey Tax Waivers?
The New Jersey Inheritance Tax Bureau issues tax waivers after an Inheritance or Estate Tax return has been filed and approved by the Bureau. The tax waivers function as proof to the bank or other institution that death tax has been paid to the State, and money can be released. An Inheritance Tax return must be filed if money is inherited by anyone other than a spouse, child or charity. An Estate Tax return must be filed if an unmarried person dies and his or her estate exceeds $675,000.00. In all other cases, the executor can get Form L-8 from the Bureau’s website [https://www.state.nj.us/treasury/taxation/prntinh.shtml], complete it, and present it to the bank, in lieu of filing a death tax return. The bank should then close the account for the Executor. Note too that banks are required by state regulation to give an Executor half of all accounts, even before presenting a tax waiver or L-8. N.J.S.C. 18:26-11.16. This allows funds to be available to pay expenses.
The use of Form L-8 makes banking transfers very easy when a surviving spouse is Executor. No estate tax is ever due when there is a surviving spouse. No Inheritance Tax is due on inheritances to a surviving spouse, child or grandchild. In these cases, the L-8 is sufficient to get the accounts retitled or closed. This is New Jersey law.
Some Banks and Financial Institutions are Improperly Requiring Tax Waivers
Unfortunately, I am frequently being told by my client Executors, that the bank will not close or transfer accounts without a tax waiver, even though one is not needed by law. Virtually all of these Executors are surviving spouses. Not only is a tax waiver not needed, but the Inheritance Tax Bureau will not issue a tax waiver when there is a surviving spouse. This leaves the widow or widower upset and concerned that they do not have access to the money in the accounts. There is no reason for this situation, as the law states otherwise.
What Should You Do?
Don’t let the bank get away with requiring documents that are not needed. The first thing you should do is ask to see the branch manager. Be polite and explain the situation. Show Form L-8 because it explains when it can be used. This should work, particularly if you are banking with a smaller bank. If it does not work, contact your attorney. Sometimes a call from counsel will get the job done. In serious cases, counsel can file a court action to compel compliance. I have filed cases to compel bank cooperation with great success. Sometimes it is the only way to get the attention needed, and rarely is a court appearance necessary.
Robert J. Shanahan, Jr. Esq. focuses his practice in estate planning, elder law and probate matters. Mr. Shanahan additionally practices in business law and non-profit matters. He is a trained, experienced mediator and offers dispute resolution services, particularly for those arising from probate and elder law matters. Additionally, Mr. Shanahan’s firm, Law Offices of Robert J. Shanahan, Jr., LLC, offers a breadth of additional services to families and businesses throughout central New Jersey.
Mr. Shanahan received his Juris Doctor from the Temple University School of Law in 1985, and obtained licensure in New Jersey in the same year. He received a Bachelor of Arts degree in History in 1981 from William Paterson University, with honors. Robert is a member and Past President of the Hunterdon County Bar Association, and is a member of the New Jersey State Bar Association, and its Elder Law and Disability Section. He is also active in the National Academy of Elder Law Attorneys. Robert is a member of the Hunterdon Medical Center’s Bio Ethics Committee and was awarded a Five Star Financial Services Professional Award for 2016.
You may contact Bob at (908) 751-1551, or [email protected]
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