Wait, why is my bank account frozen?
That’s usually the first time anyone hears about the New Jersey tax waiver. It’s a gut-punch of a realization that happens right when you’re already dealing with the loss of a family member. You go to the bank to settle things, and suddenly, they tell you half the money is untouchable. Locked away.
Basically, New Jersey places an automatic lien on the assets of someone who lived there when they passed away. It doesn’t matter if the estate is worth fifty dollars or fifty million. The state wants its cut—or at least a formal "all clear" before you can move a dime. This "all clear" is the tax waiver.
Most people think that because New Jersey repealed its Estate Tax back in 2018, the whole waiver thing just went away. It didn’t. The Inheritance Tax is still very much alive, and the waiver is the gatekeeper.
The Mystery of the Frozen 50%
If you’re an executor, you’ll likely find that banks and brokerage firms in the Garden State are legally required to freeze 50% of the funds in a decedent's account. This isn't the bank being difficult. It’s the law.
The state does this to ensure that if there is an inheritance tax due, you don't spend the money before they get theirs. To get that other 50% released, you need a piece of paper: the Form 0-1. This is the official New Jersey tax waiver issued by the Division of Taxation.
But here’s the kicker. Getting that form can take months. Sometimes many months. If the bank won't budge, you’re stuck in a holding pattern that can stall an entire estate settlement.
Who Actually Owes the Tax?
Not everyone has to pay, which is where the confusion starts. New Jersey categorizes beneficiaries into "Classes."
Class A is the VIP group. This includes spouses, civil union partners, children, grandchildren, and parents. If you fall into this group, you owe zero inheritance tax. None.
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Class C (there is no Class B for some reason) includes siblings and the spouses of children (sons-in-law/daughters-in-law). They get the first $25,000 tax-free, but after that, the state starts taking between 11% and 16%.
Class D is everyone else—nieces, nephews, friends, or that neighbor who always helped with the lawn. They get almost no break. The tax starts at 15% on everything over $500.
Then there's Class E, which covers charities and non-profits. They are exempt, but they still have to jump through some paperwork hoops.
The Shortcuts: Form L-8 and L-9
Honestly, if every single person had to wait for the state to issue a Form 0-1, the probate system would collapse. Fortunately, there are "self-executing" waivers.
If all the money is going to Class A beneficiaries, you can often use Form L-8. This is a beautiful thing. It’s an affidavit you fill out and give directly to the bank. It tells them, "Hey, everyone inheriting this is exempt, so you can release the funds now." The bank then sends it to the state for you. No waiting for the Division of Taxation to mail you something.
For real estate, there’s Form L-9. If you’re trying to sell Mom’s house and she left it to her kids (Class A), you file this with the state to get the waiver needed to clear the title. Without it, a title company isn't going to let that sale close. They’ll hold a massive chunk of the sale price in escrow until that waiver appears.
When You Can't Use the Shortcuts
You’re out of luck if:
- You’re leaving money to a sibling or a friend (Class C or D).
- The will has a complex trust involved.
- You’re claiming a "mutually acknowledged child" relationship.
- You're trying to empty a safe deposit box.
In those cases, you have to file a full Inheritance Tax Return (Form IT-R) and wait for the state to process it and mail back the physical New Jersey tax waiver.
Real-World Example: The $500,000 Surprise
Let’s say "Uncle Joe" passes away in Jersey City. He leaves his $500,000 brokerage account to his favorite nephew, Mike.
Mike is a Class D beneficiary. He doesn't get the "Class A" free pass. The bank immediately freezes $250,000. Mike can't use an L-8 form because he isn't a child or spouse. He has to file a tax return, pay the roughly 15% tax (that’s about $75,000 out of Joe's hard-earned money), and only then will the state issue the waiver to unlock the rest of the account.
If Mike had been Joe's son, he could have walked in with an L-8 and had the money in days. Relationships matter a lot in New Jersey tax law.
The 2026 Shift: Federal vs. State
We’re currently in a weird spot because of the federal "One Big Beautiful Bill Act" (OBBBA) of 2025. While federal estate tax exemptions have actually jumped to $15 million per person for 2026, New Jersey’s inheritance tax rules haven't changed.
A lot of folks get lulled into a false sense of security because they hear they won't owe federal taxes. They think, "My estate is only $2 million, I'm safe."
Nope.
If you leave that $2 million to your brother in New Jersey, the state is going to want its inheritance tax, and you're still going to need that New Jersey tax waiver. The federal exemption doesn't help you with the state’s lien.
Common Myths That Will Cost You Time
"I have a Power of Attorney, so I can just withdraw the money."
No. Power of Attorney dies when the person dies. If you use it after they pass, you're potentially asking for legal trouble, and the bank will flag it anyway."The accounts are Joint, so I don't need a waiver."
Partially true. If it’s a husband and wife (Class A), you’re usually fine. But if it’s a parent and an adult child, the bank might still freeze half the account until they see an L-8."Life insurance needs a waiver."
Actually, this is one of the few wins. Life insurance paid to a named beneficiary is generally exempt from the NJ inheritance tax and doesn't require a waiver.
Actionable Steps to Take Right Now
If you are currently handling an estate or planning your own, you need to be proactive about the New Jersey tax waiver to avoid months of frozen assets.
Check the Beneficiary Classes
Sit down and look at who is getting what. If anyone is Class C or D, start setting aside money for the tax bill now. You can't get the waiver without paying the tax, and you can't get the money to pay the tax if it's frozen. It's a "chicken and egg" problem that requires some liquidity outside the frozen accounts.
Gather Your Paperwork Early
To file for a waiver, you’ll need:
- The decedent's Social Security number.
- A copy of the death certificate.
- A copy of the Will.
- Precise values of all assets on the date of death (not the date you're filing).
File the L-8 ASAP
If the beneficiaries are all Class A, don't wait. Get the L-8 forms from the NJ Division of Taxation website and get them to the financial institutions immediately. This is the fastest way to liquefy the estate so you can pay funeral costs and other bills.
Watch the Calendar
The Inheritance Tax return and the payment are due within eight months of the death. If you miss that window, New Jersey starts tacking on interest. They are very "punctual" about charging you for being late.
Coordinate with a Title Company
If you are selling a house that belonged to the deceased, tell the title company on day one. They will check for the NJ tax lien. If you haven't secured the New Jersey tax waiver (Form L-9) yet, the closing will be a nightmare of held-back funds and frustrated buyers.
Taking these steps ensures that the state's lien is a temporary speed bump rather than a brick wall that stops your family's financial life for a year.