Published May 9, 2013
New Jersey has both an estate tax and an inheritance tax. While many assume these terms are interchangeable, they are not. The NJ estate tax and the NJ inheritance tax are distinctly different.
New Jersey Estate Tax
1. A New Jersey estate tax is imposed on a deceased person’s estate in excess of $675,000. The taxes are paid by the estate.
2. However, a surviving spouse, civil union partner, or domestic partner who is a United States citizen receives a marital deduction equal to the assets he or she inherits. Simply put, the marital deduction exempts the spouse, civil union partner, or domestic partner from paying any NJ estate taxes on his or her inheritance.
New Jersey Inheritance Tax
1. New Jersey inheritance taxes relate to beneficiaries who inherit $500 or more from a deceased person’s estate.
2. Below are the various inheritance tax categories:
– Class A: The decedent’s surviving spouse, civil union partner, domestic partner, parents, grandparents, children, stepchildren or grandchildren fall into this category. Assets left to Class A beneficiaries are exempt from NJ inheritance taxes.
Please Note, we didn’t forget Class B; it was eliminated in 1963.
– Class C: The decedent’s brother, sister, daughter-in-law, son-in-law, daughter’s civil union partner or domestic partner, and son’s civil union partner or domestic partner fall into this category. Assets left to Class C beneficiaries are taxed according to a sliding scale (based on the amount inherited).
– Class D: All other individuals who are beneficiaries fall into this category. Class D beneficiaries are taxed according to a sliding scale (based on the amount inherited).
– Class E: Transfers to the State of New Jersey for public or charitable purposes, educational institutions, churches, public libraries, certain other nonprofit agencies, etc. fall into this category. Class E beneficiaries are exempt from NJ inheritance taxes.
3. NJ inheritance taxes also do not apply under certain “Other” situations such as life insurance proceeds paid to a named beneficiary and payments from the New Jersey Teachers’ Pension and Annuity Fund. Professionals such as tax and estate planning attorneys and accountants can help you identify what qualifies as “Other.”
Getting Legal Help
Calculating NJ estate and inheritance taxes can be complicated. If you are an Executor or beneficiary, getting professional help is highly advisable. Experienced Estate Planning Attorney, Elga A. Goodman, can work with you to determine your NJ tax liability. Contact us today at 973-841-5111.
Information accurate as of the publication date of 2013
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