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The Bank Told Me I Need a Tax Waiver (Part 2)

Last week we were discussing George’s problem in helping his mother gain access to one of his dad’s accounts after his dad recently passed away.  The bank won’t permit her to tap into the account without a tax waiver.


The tax waiver protects New Jersey’s interest by insuring that it’s estate and/or inheritance tax is paid before it will issue the waiver.  After the tax return is filed and reviewed by the state to be sure that the correct tax amount has been paid, it will then issue the waiver for each account in a New Jersey financial institution and each parcel of New Jersey real estate.


But, what if there is no estate or inheritance tax to be paid?  Must a return be filed anyway?  The answer is sometimes yes and sometimes no.  There is a process by which the tax waiver requirement can be satisfied without the need to file a return.  It’s called an affidavit and self-executing waiver.


In certain situations this two page form can be completed by George’s mom and submitted to the bank and it will satisfy the tax waiver requirement.  The bank can then release the entire account to his mom without the need to file a complete tax return.


Many banks and financial institutions will readily provide the form.  “Just sign it and we’ll give you complete access to the account”, they say.  There are a set of questions on the form.  Answer them in the right way and there is no need to file a complete tax return.


But be careful.  What the banks typically don’t tell you is that the form, commonly referred to by its form number, L-8, is an affidavit.  That means when you sign it, you are swearing under oath that the answers given are truthful.  Yet, in most cases no explanation of what is on the form is provided to the family when asked to sign it.


Let’s go back to George’s case.  Is the L-8 the answer to his problem?  Actually, no it’s not.  One of the questions on the form asks whether the entire estate is less than $675,000?  But, remember that Dad’s accounts total $700,000.  The L-8 form clearly states that it cannot be used and an estate tax return must be filed.


I explained to George that this is the reason why the bank won’t release the funds to his mom.  “It’s a bit of a hassle”, I told him, but we’ll just need to prepare the return and file it even though there is no tax due.  Once the waiver is received his mom can give it to the bank and they’ll release the accounts to her.