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.
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 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.
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.
This is a huge factor in determining how much you will owe, if anything, in inheritance taxes. New Jersey classifies beneficiaries by Class:
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.
If you have any questions about New Jersey Inheritance tax or any other estate planning topics, feel free to contact us to schedule a free consultation.
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