New Jersey recently made Forbes magazine’s list of places in the United States not to die. The reason for our state’s dubious distinction is its high inheritance and estate taxes. Despite this notoriety, our governor and legislature have made a political decision to retain New Jersey’s inheritance and estate taxes because, to remain economically solvent, the state presumably needs the revenue associated with the imposition of both of these taxes. A byproduct of this political position has been the continued imposition of liens on decedents’ property and the support of an elaborate waiver system designed to help ensure the collection of such taxes.
In the sections of this analysis that follow, however, we argue that this seemingly logical practice of imposing property liens on decedents’ property coupled with an elaborate tax waiver system is administratively inefficient (i.e., its costs outweigh its benefits) and is commonly misunderstood by the players involved, resulting in inconsistent and often nonexistent compliance. The governor and legislature should therefore reform the system.
The Transfer Tax and Waiver Systems
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