Does an Inherited House Need a NJ Inheritance Tax Waiver to Sell? (Form 0-1 and L-9)

Yes, in most cases an inherited house in New Jersey needs a tax waiver before it can be sold: the state's written consent, called Form 0-1, which only the NJ Division of Taxation can issue. If every beneficiary is Class A and no tax or return is due, the executor or administrator requests it with Form L-9. Otherwise the waiver follows a full inheritance tax return.

I'm Dennis Mark Interdonato with The Dennis Mark Group. The waiver is the piece of paper that most often decides when an estate closing in Monmouth or Ocean County can actually happen, so it's worth understanding early, even though the estate's attorney or tax professional handles the filing.

What is Form 0-1, and why does the house need it?

New Jersey's inheritance tax follows the property, not only the people. The NJ Division of Taxation explains that the transfer inheritance tax is a lien on all property the person owned at death for 15 years, unless the tax is paid or secured by a bond, and that the lien exists whether or not any tax is owed. The waiver releases that lien and permits the transfer.

A few points straight from the Division:

• You don't fill out Form 0-1. The waivers page says only the Division can issue it, and that a separate waiver is issued for each asset.
• Real estate always needs it. The Division's guide for executors says real estate transfers always require Form 0-1.
• Form L-8 isn't for houses. L-8 is a self-executing waiver for financial accounts passing to certain Class A beneficiaries. It doesn't cover real estate.

The Ocean County Surrogate's planning guide adds the last step: to clear title to the real property, the tax waiver is filed with the County Clerk in the county where the land is located.

Which form gets the waiver: L-9 or a full return?

It depends on who inherits. The executor guide sorts beneficiaries into classes:

• Class A: surviving spouses, parents, children, grandchildren and similar relatives. Exempt from inheritance tax.
• Class C: brothers, sisters and children-in-law. Taxed after built-in exemptions.
• Class D: nieces, nephews, aunts, uncles, friends and non-relatives. Taxed.
• Class E: charitable institutions. Exempt.

If there are any Class C, D or E beneficiaries, the Division says a full return is needed. If everyone is Class A and no tax or return is due, the request for the real estate waiver goes in on Form L-9, the Affidavit for Real Property Tax Waiver for a resident decedent.

Who can use Form L-9, and what goes with it?

From the form's own instructions (revision 9/22, for dates of death on or after January 1, 2018):

• Who completes it: the executor, the administrator, or a joint tenant of the property.
• Class A for L-9 purposes: spouse or civil union partner; child, including a legally adopted child, grandchild and great-grandchild; parent or grandparent; stepchild, but not step-grandchildren; and a domestic partner on or after 7/10/04.
• What to attach: copies of the will, codicils and any trust agreements, the deed, the Letters Testamentary or Letters of Administration, and the death certificate.
• It's notarized, and it's mailed to the Division's Transfer Inheritance Tax unit in Trenton.

The form also lists when L-9 can't be used: if any asset worth $500 or more passes to someone outside Class A, if the relationship of a mutually acknowledged child is claimed, or if any inheritance or estate tax is due. If there's a trust, the Division may require a full return instead.

One line on the form trips people up: "This form is not a tax waiver. Do not file with the County Clerk." L-9 is the request. Form 0-1 is the waiver that comes back.

When is no waiver needed at all?

The Division lists a few situations where the house doesn't need one:

• Spouses who owned it as tenants by the entirety. The Division says this isn't considered a transfer to the surviving spouse or civil union partner, so a waiver isn't necessary. The L-9 instructions say the same: no waiver is needed for this property, and none will be issued.
• A house held in a bona fide trust at the date of death. The transfer of an asset held in the name of a trust doesn't require a waiver.

A house owned by someone who lived in another state is different. The Division says waivers are required for New Jersey real property owned by a non-resident decedent.

How long does it take to get the waiver?

For a full return, the Division tells executors to plan for processing to take at least several months, longer if the return is audited, and says about 40 to 50% of returns get that extra attention. Any tax is due within eight months of the death, with a 10% annual interest charge after that. The Division's pages I checked don't publish a processing time for Form L-9, so ask the estate's attorney what they're seeing right now.

That's why I want to know early which route the estate is on. When I'm setting a closing date with a buyer, the waiver timing matters as much as the buyer's mortgage approval. More on the full timeline in how long probate takes in New Jersey.

What are the common waiver mistakes?

• Assuming "no tax" means "no paperwork." Even an all-Class-A estate files L-9 to get the real estate waiver.
• Sending L-9 to the County Clerk. It goes to the Division, not the county.
• Missing attachments. The Division says the form is returned if it isn't fully and properly completed or doesn't have the required attachments.
• Using L-9 when a niece, nephew or friend inherits. If $500 or more passes outside Class A, it's a full return.
• Setting a closing date before checking the waiver. A buyer ready to close and an estate waiting on paperwork is a stressful week for everybody.

Frequently Asked Questions

Do I need an inheritance tax waiver to sell my parent's house in NJ?

In most cases, yes. New Jersey real estate can't be transferred out of a decedent's name without Form 0-1. If all beneficiaries are Class A and no tax or return is due, the request goes in on Form L-9.

Who can sign Form L-9?

The executor, the administrator, or a joint tenant of the property, according to the form's instructions.

Does a house owned with my spouse need a waiver?

Not if you owned it as tenants by the entirety and you're the surviving spouse or civil union partner. The Division says no waiver is needed for that property.

What if my sibling inherits part of the house?

Siblings are Class C, so the estate files a full inheritance tax return instead of L-9. Ask the estate's tax professional about the return.

This is general information, not legal, tax or lending advice. The estate's attorney or tax professional decides which form applies and files it.

About the author

Dennis Mark Interdonato is a REALTOR® and Master CDRE® who leads The Dennis Mark Group at Keller Williams Realty Ocean Living in Point Pleasant, NJ, helping buyers and sellers throughout New Jersey make their next move, with Monmouth and Ocean County as home base. See how I handle estate and probate home sales.

Keep reading

• The free Estate & Probate Guide
• Find out what the house is worth
• How to sell an inherited house in New Jersey
• Do you pay capital gains tax on an inherited house?
• Have a question this didn't answer? Send it to Dennis Mark.