Question: During his lifetime, Decedent had purchased several savings bonds. Some of the bonds are in the name of Beneficiary, only; and some are in the name of “Decedent or Beneficiary.” Are these bonds taxable under the NJ Transfer Inheritance Tax? [Note: Beneficiary is a class D beneficiary (i.e., subject to a substantial tax)].

Jonathan B. Bressman, Esq. and Kevin A. Pollock, Esq. respond:

1. According to the US Treasury, an “or” account is a “Survivorship” account. If one of two people named on a bond is deceased, the surviving person is automatically the owner.

2. Bonds solely in Beneficiary’s name are the Beneficiary’s bonds. However, there is a New Jersey Transfer Inheritance Tax on transfers within 3 years of death. Therefore, it must be ascertained when each of Beneficiary’s bonds were purchased or transferred solely to Beneficiary’s name. If more than 3 years before death, then there is no NJ Transfer Inheritance Tax. If within 3 years of death, then a 15% (16% of amount over $750,000) tax is due.

3. When a bond is in joint names, upon the death of one of them, for Transfer Inheritance Tax purposes, the presumption is that 100% belonged to the first to die (that presumption can be overcome by showing that the money to purchase the bond came from the survivor); and Transfer Inheritance Tax is due on the amount belonging to the Decedent.

4. There is no tax due on transfers having an aggregate value of less than $500.

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