by Tara H. Zane, Esq.
The New Jersey Division of Taxation has released a draft Form 0-71, the transfer inheritance and estate tax form that insurance companies must now use for reporting insurance proceeds that are paid as a result of a decedent’s death. In 2002, New Jersey revised its estate tax for the estates of decedents dying after December 31, 2001. New Jersey regulations were subsequently amended to reflect the revised estate tax. N.J.A.C. §18:26-11.30 states:
“(a) All corporations, associations, societies, or other organizations, incorporated, or organized under the laws of this State to transact the business of life insurance or to grant annuities, and all corporations, associations, societies or other organizations, corporations, incorporated or organized elsewhere and authorized by the New Jersey Commissioner of Banking and Insurance to transact the business of life insurance or to grant annuities within this State must give notice to the Director, at the time and in the manner and form hereinafter prescribed, of all sums payable by them, as a result of the death of a resident of the State, under the terms of life insurance policies, endowment policies and annuity contracts, and under the terms of supplementary optional settlement on similar contracts issued to effectuate the distribution of benefits under life insurance policies, endowment policies and annuity contracts and retain 50 percent of all sums payable until the Director issues a waiver setting forth the total of the sums payable.” (emphasis added)
N.J.A.C. §18:26-11.31 provides that the required notice is to be given by mailing Form 0-71 to the Division of Taxation, Transfer Inheritance and Estate Tax Section, as soon as practicable after the death of the decedent, but in any event not later than 10 days after any part of the sums required to be reported have been paid. If Form 0-71 is properly completed and has been mailed or will be mailed within 10 days to the Division of Taxation, and a copy sent within the same period to each beneficiary, all sums payable (100%) under the terms of the policy or contract may be paid without obtaining a tax waiver.
If a beneficiary wants or needs 100% of the policy proceeds as soon as possible, he should submit a copy of Form 0-71 and its accompanying instructions, make reference to the provisions permitting a 100% payment, provide the name, address, relationship and social security number of each beneficiary and request that the insurance company comply with the requirements related to making a 100% payment. After a 100% payment to the beneficiary, the beneficiary will be liable for any inheritance or estate tax due from such proceeds – to the extent not otherwise provided by a decedent’s estate plan.
http://www.state.nj.us/treasury/taxation/pdf/other_forms/inheritance/o71.pdf
This Legal Alert was prepared by Tara M. Zane. Ms. Zane is an Associate in Capehart Scatchard’s Business and Tax Group as well as the Wills, Estates and Trusts Group.
For more information on Capehart Scatchard, visit our website at www.capehart.com.
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