By Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold New Jersey Estate Administration Attorney
This is part 3 of a 3 part blog discussing the calculation of executor commissions in the sale of real estate in New Jersey as part of estate administration and probate.
In this case, the Court found the Director’s arguments to be unpersuasive. The Judge ruled that the New Jersey Transfer Inheritance Tax Act imposes a tax on the transfer of real and personal property by a decedent as a result of his or her death. Those taxes are based on the “clear fair market value of the property transferred”. In determining the clear market value of the property, the Act clearly specifies what may be deducted. The Act provides:
In determining the clear market value of the property the following deductions and no others shall be allowed:
• The property for which the debt is owing or for which it is secured is subject to the death tax;
• A foreign debt exceeds the value of New Jersey property securing it or for which it was contracted:
• Funeral and last illness expenses – A reasonable sum for funeral expenses and last illness.
• Administration expenses; fee of executors and attorneys – The ordinary expenses of administration, including the ordinary fees allowed executors and administrators and the ordinary fees of their attorneys.
• Payment of state, county and local taxes upon the property for the current fiscal year
• Transfer taxes of other states or the United States – Transfer taxes paid or payable to other states or territories or the District of Columbia or foreign countries on any property the transfer of which is taxable.
The New Jersey Transfer Inheritance Tax is imposed upon the transfer of property based upon the clear market value of such property. Clear market value is ascertained by deducting from the market value of any property, the debts, expenses and taxes which constitute an encumbrance upon the property of a decedent. No deductions are allowed, however, against any property which is exempt or not subject to the New Jersey Inheritance Tax.
The Court held that the balance of a mortgage owing on the date of death is allowed as a deduction from the value of any real property securing such mortgage, except that in the case of realty held by a decedent and a surviving spouse as tenants by the entirety, the amount of any mortgage owing on such realty at the decedent’s death is not allowable as a deduction since such property is exempt from the New Jersey Inheritance Tax.
The deduction for executor’s or administrator’s commissions shall be determined in accordance with NJ law, as of the date of death of decedent as follows:
• 5% on the first $200,000 of all corpus received by the fiduciary;
• 3.5% on the excess over $200,000 up to $1,000,000;
• 2% on the excess over $1,000,000; and
• 1% of all corpus for each additional fiduciary provided that no one fiduciary shall be entitled to any greater commission than that which would be allowed if there were but one fiduciary involved.
Contact me personally today to discuss your New Jersey administration and probate matter. I am easy to talk to, very approachable and can offer you practical, legal ways to handle your concerns. You can reach me toll free at (855) 376-5291 or e-mail me at email@example.com.