New Rules Proposed for NJ Death Tax Escrows

The New Jersey Division of Taxation has proposed new rules for title insurance companies holding escrow amounts from real estate closings for the payment of transfer inheritance and/or estate taxes. New  N.J.A.C.18:26-11.21 would require title companies to notify the Division in writing, within 10 days of receipt of the transfer inheritance and/or estate tax related escrow monies and to forward to the Division a copy of any HUD-1 RESPA statement and deed that issued from the transaction.

Within six months of receiving notice form the title company, the Division of Taxation would be required to advise the title company in writing of the total amount of inheritance and/or estate tax that is due within six months or inform the company of any additional information needed to make a tax determination.

A title company would be required to forward the escrow amount, up to the amount set forth in the Division’s notice, to the Division within 10 days of receiving the Division’s notice Alternatively, the company must comply with requests for any other information and documentation the Division may request arising out of the real estate transaction.

If the company fails to turn over to the Division the escrow amount as required, the company may be liable for payment to the Division in the amount of the transfer inheritance tax plus statutory interest due or to become due on the tax due and owing, in addition to being liable to a penalty of $1,000.

The Division has provided a 60-day comment period on this notice of proposal. Comments are due by November 20, 2009.