What you need to know about the changes to the New Jersey Estate Tax law
New Jersey has long been thought of as the worst state to die in…and for good reason, New Jersey has been one of very few states to impose both a New Jersey Estate Tax and a New Jersey Inheritance Tax upon a person’s passing. Fortunately, this is all about to change. The new tax law will usher in sweeping changes as of January 1, 2018. Here is what you need to know:
New Jersey Estate Taxes
Old Law: Estate Tax Exemption of $675,000
What did this mean? This meant that if you died a resident of the State of New Jersey with gross assets (including lifetime taxable transfers) exceeding $675,000, your heirs would be required to file a New Jersey Estate Tax Return and possibly pay New Jersey Estate Taxes. There is no non-resident New Jersey estate tax.
New Law: Estate Tax Exemption for 2016: $675,000
Estate Tax Exemption for 2017: $2,000,000
2018 – Complete Repeal of the New Jersey Estate Tax
For many individuals who have engaged in estate planning to protect their heirs from the New Jersey Estate Tax, this means that your current Wills may have unintended consequences due to the formula language contained in your existing Wills. It is important that you review your current estate plan in order to determine whether any changes need to be made in order to effectuate your desired disposition of your assets at your death given the changes to the New Jersey Estate Tax law.
New Jersey Inheritance Tax
The New Jersey Inheritance remains unchanged. Here is what you need to know:
New Jersey Inheritance Tax is based on a class system. The Inheritance Tax is based upon who is receiving your money. Death bed transfers count – New Jersey will impose an inheritance tax on all transfers made in contemplation of death within three years of a person’s passing. There is a non-resident Inheritance Tax.
Class A Beneficiary -- This class of beneficiaries includes your father, mother, grandparents, spouse/civil union partner (after 2/19/07), domestic partner (after 7/10/04), child or children of the decedent, adopted child or children of the decedent, issue of any child or legally adopted child of the decedent, and step- child of the decedent. Any assets passing to Class A beneficiaries are exempt from New Jersey Inheritance Tax.
Class C Beneficiary -- This class of beneficiaries includes your brother or sister of the decedent, including half brother and half sister, wife/civil union partner (after 2/19/07) or widow/ surviving civil union partner (after 2/19/07) of a son of the decedent, or husband/civil union partner (after 2/19/07) or widower/surviving civil union partner (after 2/19/07) of a daughter of the decedent. There is a $25,000 exemption for assets passing to these beneficiaries. This class of beneficiaries is taxed on the excess at between 11% - 16%, depending on the amount of assets transferred.
Class E Beneficiary -- This class of beneficiaries includes charities. Any assets passing to Class E beneficiaries are exempt from New Jersey Inheritance Tax.
Class D Beneficiary -- This class of beneficiaries includes every other transferee, distributee or beneficiary who is not included in Classes “A”, “C” or “E”. This class of beneficiaries is taxed between 15% - 16%, depending on the amount of assets transferred.
For additional information or to review your current estate plan, please contact Karen J. Shvarts, Esq. at