Bulletin: NJ000064

Dear Associates:

Effective July 1, 2002 New Jersey Estate Taxes now constitute a lien on the real property of the estate of decedents who died after December 31, 2001, where the value of the estate is in excess of $675,000. Previously, New Jersey Estate Taxes although due on larger estates, were not a lien on the estate's real property and consequently not a matter to which we took exception. The tax is imposed when the New Jersey Inheritance Tax on the state is lower than the maximum credit allowed on the Federal Estate Tax for state "death" taxes. It is designed to permit the State of New Jersey to collect the maximum deductible amount rather than the tax being paid to the federal government. The New Jersey Estate Taxes, therefore are in addition to any New Jersey Inheritance Transfer Taxes due from an estate.

The following requirement must to added to Schedule B, Section I, of all commitments, where title is vested in an estate and the decedent died on or after December 31, 2001:

Satisfactory proof is required, prior to closing, that all New Jersey Estate Taxes due pursuant to N.J.S.A. 54:38-1 et seq. have been paid. A New Jersey State Estate Tax waiver from the New Jersey Division of Taxation must be recorded and a copy provided to the Company. In the alternative, satisfactory proof must be provided, prior to closing, that the estate is not subject to said tax.

The New Jersey Division of Taxation is in the process of formulating forms and rules to implement the change in the law. The Division anticipates having their revised rules and forms in place by September 1, 2002. In the interim, the Division will most likely accept either of two methods for filing for the Estate Taxes. IRS Form 706 (available at http://www.irs.gov) may be used to provide the information required. Alternatively, the Inheritance Tax form may be used together with a report, which adds back into the estate assets, required to be included for calculating the amount of the estate in federal tax terms. The Division of Taxation may be reached at (609) 292-7025 for more information.

It is anticipated that the Division will issue waiver letters for the Estate Tax, similar to those issued for Inheritance Taxes, once the new rules are in place.

For clearance purposes, where the estate is less than $675,000 (as calculated under the federal law) the Company requires that a completed estate questionnaire from the executor, or administrator stating that the estate is less than $675,000 be provided prior to closing. (See attached questionnaire).

Where the estate is in excess of $675,000 the Company requires, prior to closing:
A completed estate questionnaire

1. Proof of payment of the New Jersey Estate Taxes.
   
   
2. A New Jersey Estate Tax Waiver from the Division of Taxation must be recorded.
   
   
3. These requirements are in addition to our standard requirements as to New Jersey Inheritance Taxes and Federal Estate taxes.

You should also remember that the federal estate tax exemptions were increased as follows:

However, the New Jersey Estate Tax exemption remains at $675,000 and does not follow the rise in the federal exemption.

In transactions where the above requirements cannot be met, the Company should be contacted for authority to accept escrow deposits and indemnifications. We understand that waivers may not be available until the Division has implemented its new regulations and we may have to rely upon undertakings to record same when available.

This situation will remain in flux until such time as the Division of Taxation has established its procedures, at which time the Company will provided further underwriting guidelines. Should you have any questions, please call the state office.