How to Leave Personal Property (Part 4)
How to Leave Personal Property (Part 4)
In my blog post last week discussing personal property, I explained that leaving a written list in your will can problematic for several reasons. This week I will tell you about one specific reason. The State of New Jersey may come calling.
That’s because it periodically checks with the county surrogate offices to see what has been probated. If, for example, my will identifies a tangible item I wish to leave my niece or my friend, that also means there may be inheritance tax owing because that person is a Class D beneficiary. Anything I leave to that person with a value of more than $500 will be subject to tax at a 15% (or if the bequest is large enough a 16%) rate.
The State typically sends a notice to the executor stating that no inheritance tax return has been filed and if one isn’t filed the State will impose an arbitrary assessment of tax. This arbitrary amount is more than what any tax is likely to be but it generates the State’s desired response. If the return is not filed the assessment becomes final regardless of whether it is accurate or not. It is simply designed to get the estate to file the return to avoid this arbitrary amount which in some cases may exceed the entire value of the estate.
So, when a will contains a list of tangible items, it creates an obligation to appraise those items (or explain that they no longer exist) and file an inheritance return even if the items no longer were in the decedent’s possession at the time of death or have little to no monetary value. The executor will need to satisfy the state auditor that for these reasons no inheritance tax is due.
On the other hand, the property memorandum is not submitted to the Surrogate with the will. This document is not a matter of public record and these items, if they still exist, and which more times than not are valued more for their emotional attachment than any monetary value, are handled internally. Of course, if they do have value and are left to non Class A beneficiaries, an inheritance tax return and the tax must be paid, but there is no arbitrary assessment held over the estate’s head.