NJ Inheritance Tax is computed on the clear market value of property transferred, valued at the date of death. In the Estate of Claire Schinestuhl,the NJ Division of Taxation determined that the shares of a publicly traded company inherited by the decedent, Claire, from her brother, Prescott Schinestuhl must be separately valued as of the date of Claire’s death and not about two years later when the sale proceeds of the shares were distributed by her brother’s estate.
On September 13th, 2004, Prescott Schinestuhl died, and left his entire estate to his sister, Claire and appointed her Executrix of his Will. As Executrix, Claire applied to Essex County Surrogate’s Court for probate of Prescott’s will. Probate was denied, on October 28, 2004 because Prescott’s Will was “not executed in manner and form as required by law.” Soon after the denial, on November 7th, 2004, Claire died testate. Her will, probated December 22, 2004 appointed her cousin, Mary Acquardo (“Plaintiff”), as executrix. On September 16, 2005, the New Jersey Superior Court granted Plaintiff letters of administration to Prescott’s Will in addition to Claire’s estate. When Plaintiff filed the New Jersey Resident Inheritance Tax Return for the Estate of Prescott in October 2005, 22,121 shares of Paxar, a publicly traded company, were valued at $477,371; the value at the time of Prescott’s death.
In January 2007, Plaintiff filed a New Jersey residence inheritance tax return for Claire’s estate. Included in Claire’s estate were the 22,121 of Paxar valued at $395,046, the value of the Paxar shares on October 12, 2006, the day the shares (from Prescott’s inheritance) were liquidated to distribute the proceeds to Claire’s estate.
Plaintiff argued that there could be simply “no value….on Claire’s inheritance until after her interest was determined by the judicial decision”. Furthermore, Plaintiff contended that the value of Claire’s interest was a contingent interest, with an unascertainable value as of her death because the Surrogate denied probate.
In Estate of Claire Schinestuhl v. Director, Division of Taxation, February 2, 2012, the plaintiff unsuccessfully attempted to misconstrue this contingency concept as well as other valuation rules. The Court refuted her claims, citing a previous case, Estate of Franko v. Director, in which the court interpreted the term “contingent interest” as one where “no present interest exists, and that whether such interest or right will ever exist depends on a future uncertain event.” An interest is contingent when the Will itself makes a conditional bequest. The fact that Prescott’s Will was not probated as of Claire’s death did not make Claire’s interest in Prescott’s assets contingent or conditional.
The Court valued the stock at the market value at the date of Claire’s death and not about two years later when the sale of the proceeds were distributed by her brother’s estate. The valuation date for NJ Inheritance Tax purposes is the date of death and neither appreciation nor decline in asset values thereafter has any bearing on the determination of the tax.