New Jersey is one of two states in the U.S. that employs an estate tax and an inheritance tax in addition to the federal estate tax. These taxes can take a large portion of assets out of an estate. In some instances, these taxes do not apply, depending upon the total value of the estate and the relationship of the beneficiaries to the decedent.
The Transfer Inheritance Tax is not imposed if the decedent’s assets amount to less than $500. Similarly, the New Jersey Estate Tax must be filed only if the decedent’s estate, including adjusted taxable gifts, is valued at more than $675,000.
The Transfer Inheritance Tax is not imposed on certain beneficiaries, including the father, mother, grandparents, descendants, spouses, civil union partners, or domestic partners of the decedent. There are other exemptions from the Transfer Inheritance Tax that may be less obvious: for example, annuities that are payable to survivors of military retirees are exempt from the Transfer Inheritance Tax. When the Transfer Inheritance Tax is imposed, the rate at which it is levied depends upon the relationship of the beneficiary to the decedent–siblings, for example, are taxed at a lesser rate than friends of the decedent.
You can visit the New Jersey Department of the Treasury site for an overview of the New Jersey Estate Tax and Transfer Inheritance Tax.
An experienced attorney can help you to determine whether you are exempt from filing a New Jersey estate tax return or transfer inheritance tax return depending upon the value of the assets you have received, your relationship to the decedent, and various other factors that you may not have considered.
NJ estate taxes can be steep–proper estate planning can help one to mitigate against large portions of assets being taken from loved ones through taxation. Creating a trust, for example, is one way to avoid estate taxation. A law firm that offers estate planning services, like Byrnes, O’Hern & Heugle, can help you to determine the best ways to protect your assets from estate taxes. Our attorneys have a long history of helping clients with creating wills, trusts, and other estate planning documents.