The New Jersey Estate Tax Repeal and How it Affects You

December 2, 2016

New Jersey has repealed the Estate Tax law, which goes into effect as of January 01, 2018. Effective January 01, 2017, however, the exemption amount rises from $675,000 to $2,000,000. Prior to January 01, 2017, if you died in New Jersey and had assets over $675,000, your estate was subject to Estate Tax at a rate between 11% and 16%, depending on the size of your estate. This tax was applied regardless of who was inheriting your assets. Due to the repeal of Estate Tax, if you or a loved one dies on or after January 01, 2018, your estate will not pay Estate Taxes.

 

However, it is important to keep in mind that while Estate Tax is being repealed, Inheritance Tax is not going anywhere. Inheritance Tax is a tax on the class of the beneficiary of your estate, not the size of your estate as with Estate Tax. Inheritance Tax imposes tax on certain people who are beneficiaries of your estate. Parents, spouses, children, and grandchildren are exempt from Inheritance Tax entirely. Siblings, your son-in-law, or your daughter-in-law are taxed 11% to 16% after a $25,000 exemption. Any other beneficiary, such as a niece, nephew, cousin, aunt, uncle, or friend is taxed 15% to 16% with no exemption (unless the transfer is less than $500, then it is exempt). 

 

By way of example, if you die in New Jersey and leave an estate worth $700,000, which gives half of your estate to your son and the other half to your niece, your estate will pay approximately $52,500 in Inheritance Tax, subject to deductions for certain expenses such as bills due and owing upon your death, executor's fees and attorney's fees paid from the estate.

 

Inheritance and current Estate Tax Rates:

http://www.state.nj.us/treasury/taxation/inheritance-estate/tax-rates.shtml

 

Inheritance Tax Beneficiary Classes:

http://www.state.nj.us/treasury/taxation/pdf/other_forms/inheritance/transferinheritanceclasses.pdf

 

 

 

 

 

 

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