Do I need an inheritance tax exemption to sell this house?
Q. I am the administrator of our uncle’s estate. I have already received my letters from the probate court. He was a resident of New Jersey and his three remaining parents – his sister, me and my brother – are not. I know I have to file an inheritance tax return in order to release the remaining half of his bank account. I don’t know how to pay the appropriate tax on the proceeds from his house that we haven’t sold yet. I also understand that I need the waiver to sell the house. This loop is where I’m confused. I can’t sell the house without the waiver, but I can’t get the waiver until I pay taxes. How do I pay the tax if I don’t know what the house will sell for?
A. Let’s start with a factual inaccuracy you made.
While you are correct that you will have to file an inheritance tax return due to the existence of non-“Class A” beneficiaries, it is incorrect to say that you cannot sell your uncle’s house.
While you may need a tax exemption from the New Jersey Taxation Division, the lack of such an exemption does not prevent you from selling the home, said Tom Szieber, an attorney specializing in trusts and investments. estates with Herold Law in Warren.
Rather, it means that the settlement agent / title company involved in the transaction will almost certainly hold a significant portion of the proceeds in escrow until they have proof, in the form of a waiver, that the estate does not. owes no inheritance tax, he said.
As for valuing the house for the purposes of the estate tax return, your best option is to get an appraisal of the property on the date of your uncle’s death, Szieber said.
By using the estimated date of death value and the date of death value of your uncle’s other assets, you – or more likely, a tax preparer such as an accountant – will be able to prepare and file the tax return. inheritance tax and, once the taxes owed are paid, get the waiver, he said.
If the house has already been sold, you can provide the settlement agent / title company with the waiver to get the escrow release, he said. If it has not been sold, issuing the waiver will allow you to completely avoid a receiver.
“If the sale of the property took place before the filing of the inheritance tax return, a secondary option is to use the purchase price as the value on the inheritance tax return, provided the sale is a transaction arm’s length, ”Szieber said. .
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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. Sign up for NJMoneyHelp.com‘s weekly electronic newsletter.