New Jersey Estate Tax: Recent Changes Every Resident Should Know

New Jersey Estate Tax: Recent Changes Every Resident Should Know

New Jersey eliminated its estate tax in 2018, but inheritance tax still affects many families and estates.

Current New Jersey Tax Structure

• Estate tax: Eliminated for deaths after January 1, 2018. No estate tax return is required for decedents who passed away after this date.

• Inheritance tax: Still applies to certain beneficiaries, depending on their relationship to the deceased and the value of the inheritance.

• Class A beneficiaries: Spouses, children, grandchildren, parents, and grandparents are fully exempt from New Jersey inheritance tax.

• Class C beneficiaries: Siblings, and sons- or daughters-in-law pay inheritance tax at rates ranging from 11% to 16%, depending on the amount inherited.

• Class D beneficiaries: All other individuals (including friends, cousins, and most non-relatives) pay inheritance tax at rates of 15% to 16%.

• Charities: Most charitable organizations are exempt from inheritance tax, but it’s important to confirm the organization’s status.

What This Means for New Jersey Families

• Direct descendants: If you leave assets to your spouse, children, grandchildren, parents, or grandparents, there is no New Jersey inheritance tax.

• Siblings and in-laws: Siblings and sons- or daughters-in-law will pay inheritance tax, with rates increasing as the amount inherited rises.

• Non-relatives: Friends, distant relatives, and most others will pay the highest inheritance tax rates.

Planning Strategies for New Jersey

• Beneficiary planning: Review who will inherit your assets and understand the tax implications for each beneficiary class.

• Gifting strategies: Consider making gifts during your lifetime to reduce the size of your taxable estate. However, large gifts may have federal gift tax consequences, so review IRS rules before proceeding.

• Trust planning: Certain trusts may help minimize inheritance tax exposure, but the effectiveness depends on your specific situation and the trust’s structure.

New Jersey’s tax changes provide opportunities for strategic planning, but the right approach depends on your family structure, asset types, and long-term goals.

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Disclaimer: This blog post is for general informational purposes only and does not constitute legal advice. Tax laws and outcomes can vary based on your personal circumstances and the evidence available. Always review your situation carefully before making decisions.