Are trusts exempt from inheritance tax?


Q. I am the person responsible for my mother’s revocable trust. She passed away in December 2020. There are three appointed trustees and all of them are Class A beneficiaries. We do not know what tax documents we need to produce. Are trusts exempt from inheritance tax?

– The executor

A. We are sorry to hear about your mother.

We’re also glad you asked for help, as closing a person’s estate can be confusing.

Property in a revocable trust is included for tax purposes in the estate of a deceased person, while property in a irrevocable trust is usually not included, said Catherine Romania, estate planning lawyer at Witman Stadtmauer in Florham Park.

Since the revocable trust property is included, the type of property and the beneficiaries of the entire estate – both inside and outside the trust – must be taken into account in determining whether an estate tax return, and of what type, should be filed. , she said.

Although a declaration of inheritance tax may need to be filed, waivers are not necessary and are not issued for property held in the revocable trust, Romania said.

A non-resident deceased person is only taxed on real and tangible property located in New Jersey, she said.

“An inheritance tax cannot be incurred if the beneficiaries of the trust that owns this New Jersey property are all Class A beneficiaries such as the children of the deceased,” she said. “The relationship between the trustees doesn’t matter. “

An L-9, for a deceased resident, and an L-9 NR, for a deceased non-resident, are filed in order to obtain a waiver for real property held in the direct name of the deceased, but this is not necessary in the event that the title is held in the name of a trust, she said.

“If an inheritance tax return is required in a situation where there is a trust, the IT-R (resident) or IT-NR (for non-residents) must be filed, even if waivers are not not necessary, ”she said. “An example would be when a specific bequest is made in the will to a beneficiary not belonging to category A, so that the entire estate is not now fully paid to beneficiaries of category A, even if the whole of the trust can be allocated to the beneficiaries of category A ”.

Email your questions to [email protected].

Karin Price Mueller writes on Bamboo column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Register for NJMoneyHelp.com‘s weekly electronic newsletter.



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