Hold on a Minute: Non-Probate Assets Can be Recaptured to Pay New Jersey Inheritance Death Taxes

HNW Elder Law, Estate Administration and Probate

By Fredrick P. Niemann, a New Jersey Estate Administration and Probate Attorney

I recently received a question from a client concerning the liability to pay New Jersey Death Taxes. Apparently, the decedent signed a Will which provided that all inheritance and death taxes would be paid from the residuary estate. The residuary estate is the entirety of the estate but excludes non-probate assets.   Probate assets are those assets owned by an individual at death without a beneficiary designation.   Non-probate assets are assets that name a beneficiary upon death or are jointly owned with another person.

Unfortunately in this case, the residuary estate did not contain sufficient funds to cover New Jersey Transfer Inheritance Taxes. Located inside the Will was a specific bequest of probate assets to be paid to a named beneficiary.   If this specific bequest was not paid, however, then there would be sufficient funds to pay New Jersey Death Taxes. The question presented was whether the Executor could withhold the payment of the specific bequest to cover the shortfall in New Jersey Death Taxes. My answer to the client was direct and simple, yes. Both probate and non-probate assets are subject to payment of New Jersey Death Tax and Inheritance Taxes regardless of provisions in the Will.   The Executor of the estate was told he should apply the specific bequest proceeds to satisfy death taxes and any leftover funds could then be paid over to the beneficiary.   I would note, however, that the payment of taxes should be apportioned based on the percentage of inheritance received by both the beneficiary of the specific bequest as well as the residuary beneficiaries.

Have probate and estate questions? Need answers? Then contact Fredrick P. Niemann, Esq., a New Jersey attorney, welcomes inquiries regarding Estate Administration and Probate of estate matters throughout all 21 counties of the State of New Jersey.  Please call me toll-free at 855-376-5291 or email me at fniemann@hnlawfirm.com.

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