By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Estate Administration & Probate Attorney
In a recent post I read about a decedent (D) who was a NJ resident. She died in March unmarried and childless, but she had a 401(k) valued at approximately $300,000. Apparently, there was no beneficiary designation and the amount defaulted to the decedent’s estate per the plan terms. In any case, the 401(k) was paid to D’s estate, and the estate distributed the $300,000 amount received (along with other assets comprising the estate) to D’s mother (M) as sole beneficiary of the estate. M is a non-resident of NJ (she resides in Ohio).
Of course, D’s estate received a 1099-R from the plan sponsor, but by distributing all the estate assets to M (and taking an income distribution deduction on the Form 1041 return), M now picks up the estate’s income.
For federal income tax purposes, there is no issue – Mother reports the $300,000 income on her Federal Form 1040 for 2018.
But what about NJ income tax? Here we have NJ Decedent, a NJ estate, but a non-NJ beneficiary? The question presented is whether mom will be subject to tax on the income for NJ income tax purposes and therefore needs to file a NJ Form 1040 reporting the $300,000 amount?
The answer is straight forward; NO!. A NJ 1041 gets filed for the estate, but Mom does NOT file NJ 1040 income tax return.
To discuss your NJ Estate Administration & Probate matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at firstname.lastname@example.org. Please ask us about our video conferencing consultations if you are unable to come to our office.