Transfer Inheritance Tax must be paid in NJ when wealth is transferred at death to certain categories of recipients. There is no tax on transfer to charities or to “Class A” beneficiaries – these are spouses, lineal descendants and lineal ancestors as well as step children. However there is a tax of 11% on everything above $25,000 per person that passes to a sibling of the deceased (“Class C’s) and a tax of 15% on everything that passes to anyone else (“Class D’s”). In some cases, the Will that is probated at the Surrogate specifies a certain set of distributions, and a beneficiary sues to set it aside, alleging that the deceased lacked mental capacity to make the Will (“lacked testamentary capacity”) or that someone unduly influenced the deceased to make that Will. These are often referred to as “Will contests.” If the lawsuit is settled, the distribution to the heirs may be different than what the Will specified.
Last year, the NJ Tax Court ruled that when it comes to calculating the amount of Transfer Inheritance Tax due, the terms of the Will control, not the terms of the settlement. http://caselaw.findlaw.com/nj-tax-court/1674005.html
The Executor evidently had underpaid the tax, and the treasury imposed interest on the underpaid amount. In this redux of the case, on January 22nd, the Tax Court confirms the underlying rule, and denies a reduction in the interest.35-5-5621 De Rosa v. Dir., Div. of Taxation, Tax Ct. (Bianco, J.T.C.) (13pp).11413-11opn