New Jersey Inheritance Tax

New Jersey imposes inheritance taxes on decedent estates at the time of death. Depending on the person’s relationship to the decedent, the amount of taxes owed will vary. This article explains in depth how the inheritance tax may affect you when you inherit from a loved one who dies.

New Jersey Inheritance Taxes: Is This the Same Thing as Estate Taxes?

In short, no. The inheritance and estate taxes are two separate issues. The state estate tax exemption in New Jersey is $2,000,000. If an estate exceeds $2,000,000 in 2017, the tax is calculated on the excess amount. However, the New Jersey Legislature eliminated the estate tax for anyone who dies after January 1, 2018.

The inheritance tax is a tax on a beneficiary’s right to receive property from a decedent. Any property, or income from property, that a decedent transfers to a recipient or that a beneficiary uses are subject to the New Jersey Inheritance Taxi. The inheritance tax is calculated by the value of the asset transferred, less any available deductions or exemptions; and the relationship between the decedent and the beneficiary. The inheritance tax is imposed on a beneficiary that receives property valued at $500 or more. Therefore, if you receive something worth $499, you will not be required to pay any inheritance taxes. Life insurance is also exempt.

New Jersey Inheritance Taxes: Who Does This Apply To?

New Jersey inheritance taxes apply to residents of New Jersey. It also applies to non-residents of New Jersey who own real or personal tangible property located in New Jersey. Real property includes real estate: shore homes, rental properties, etc. Personal property refers to any movable property. This article mentions that the decedent has to be a resident of New Jersey. So, the person who’s estate is subject to the tax must be considered domiciled in the state of New Jersey at the time of his or her death.

Rules of Domicile

Domicile is about intent. It requires physical presence or contact with New Jersey, or an intent to return to New Jersey after leaving it. The courts have long held that a person is presumed to be domiciled in one state until another domicile is established in another. In New Jersey, you are considered a resident if you live there, or if you do not have a permanent home in the state that you spend no more than 30 days in New Jersey; or if you own a residence in New Jersey and spend more than 183 days in New Jersey. However, a taxpayer will not avoid New Jersey inheritance taxes if that person is out of the state for 183 days or more.

Relationship of the Person Inheriting to the Decedent and the Level of Tax to be Paid

This is a huge factor in determining how much you will owe, if anything, in inheritance taxes. New Jersey classifies beneficiaries by Class:

Class A: A spouse, civil union or domestic partner of a decedent, a father, mother, grandparent, child or children or step-children of a decedent, and any child or children adopted by the decedent, the issue of such child or adopted child, and in certain circumstances, non-biological children of the decedent where the child was the offspring of a biological parent in a civil union or domestic partnership with the decedent. NO TAX
Class C: A brother or sister of the decedent, or a spouse or civil union partner of a child of a decedent or a surviving spouse or surviving civil union partner of a child of a decedent:
- 11% on any amount in excess of $25,000 up to $1,100,000 (there is no tax on an amount below $25,000);
- 13% on any amount in excess of $1,100,000 up to $1,400,000;
- 14% on any amount in excess of $1,400,000; and
- 16% on any amount in excess of $1,700,000.
Class D: Every other beneficiary not otherwise classified (with no tax on transfers having an aggregate value of less than $500):
- 15% on any amount up to $700,000; and
- 16% on any amount in excess of $700,000.
Class E: Tax exempt charities and governmental bodies. This includes, but is not limited to, the State of New Jersey and any political subdivision, educational institution, church, hospital, and library. NO TAX

Common Questions About the New Jersey Inheritance Tax

Who Files the New Jersey Inheritance Tax Return?

Unless you fall under a Class A beneficiary, the responsibility falls on the estate’s Personal Representative to file the appropriate tax return and pay the tax. Payment accompanies the return.

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Estate and Inheritance Taxes

Peter Klenk is the founding member of Klenk Law, a seven attorney boutique estate planning law firm. We serve clients in Pennsylvania, New Jersey, New York, Minnesota and Florida. Peter Klenk received his Masters in Taxation LL.M. from NYU Law School and his J.D. from the University of Minnesota Law School. He served his country in the Navy JAGC during Desert Storm. Easy to talk to, feel free to call Peter for an appointment. We will make the process as easy as possible!

New Jersey Inheritance Tax: Everything You Need to Know