95 N.J.L.J. 1209
November 16, 1972
Preparations of Inheritance Tax
Returns by Non-Lawyers
May a person, not a member of the Bar of New Jersey, acting
for another, prepare inheritance tax returns to be submitted to the
Transfer Inheritance Tax Department of the State of New Jersey?
The answer to this question depends on whether the preparation of this tax return merely involves the setting down of figures, or whether the knowledge of law and application of legal principles are required. Therefore, it would be in order to examine the inheritance tax return itself.
Schedule "A" requires the listing of real estate owned by the decedent. Because different forms of ownership are not taxed or taxed in a different manner, it is imperative that the preparer of the return know the legal difference between a tenancy by the entirety, a joint tenancy with right of survivorship, or a tenancy in common. For example, the inclusion of tenancy by the entirety in a return might result in its taxability, whereas it is not only non-taxable but need not be reported. Similarly, a mistake in reporting a joint tenancy as a tenancy in common or vice versa, could result in a greater tax being paid by the estate.
Schedule "B," in dealing with personal property, also involves the distinction between joint tenancies and tenancies in common and their taxability. This Schedule also involves legal knowledge in the fields of law such as corporations, partnerships, closely held corporations, agency, trusts, custodial accounts, contracts (for example buy and sell agreements), etc.
The attorney in preparing the return obviously needs the assistance of other specialists, for example the real estate appraiser. In Schedule "B", where partnerships or closely held corporations are involved, the attorney would obviously require that an accountant furnish the necessary balance sheets and profit and loss statements as required by the State of New Jersey, and subsequently consult with the accountant as to valuation.
Schedule "C", with its nine questions, involves a myriad of legal interpretations involving transfers, gifts in contemplation of death, inter-vivos trusts, ownerships of property, life insurance and annuities.
Schedule "D" relating to deductions, concerns itself with what deductions are allowed, legal claims against the estate, etc.
Schedule "E" concerns itself with the listing of beneficiaries.
However, even in the case of testacy, legal questions could be involved such as the statute relating to lapses, ademptions, or statutes relating to taxability such as those dealing with an adopted child or a child in the household of decedent for a specified number of years. In the case of intestacy, there is required a complete knowledge of the laws of descent and distribution and, as a matter of fact, instructions in the inheritance tax return require the listing of the parentage of all collateral heirs.
Based upon the above, it is the opinion of the Committee that the preparation of an inheritance tax return requires the application of a gamut of legal principles, and that its preparation by a non-lawyer, acting for another, would constitute the unauthorized practice of law.