The Bank Told Me I Need a Tax Waiver

George called me because his father had recently died.  He told me that his mother was having difficulty accessing all of Dad’s accounts.  “The bank where he has most of his accounts wants a tax waiver,” George told me.

I asked a few more questions.  Dad had a few accounts at that financial institution totaling $700,000.  Some accounts had Mom designated as the primary beneficiary.  Other accounts were owned jointly with Mom.  There also was one account in Dad’s name alone, without any beneficiary designations.  George told me that his dad’s will leaves everything to Mom.

I already knew what his problem was before he confirmed it for me.  It has to do with a piece of paper called a tax waiver.  Sure enough, George told me that the bank would not release all the funds to Mom without her providing them with the tax waiver.

I explained to George that the State of New Jersey automatically places a lien on certain New Jersey located property – real estate and accounts in New Jersey financial institutions –  to protect the state and insure that estates pay all New Jersey estate and inheritance tax that is owed.  The lien is released when the State issues a piece of paper called a tax waiver.

George sounded a little perplexed.  “How can there be any estate or inheritance taxes,” he asked.  “I thought that since everything passes to Mom there is no tax.”

He is correct.  Under what is known as the marital deduction, transfers between spouses are not subject to estate or inheritance tax.  So, why do they need a tax waiver at all and how do they get one?  Next week I’ll share with you what I told George.