Inheritance tax is a type of estate tax that is imposed on the recipient of an inheritance. If you live in New Jersey or own real estate or other property in the state, your beneficiaries may be required to pay a tax on the amount they receive. The amount they must pay is determined by how they are related. Read on to learn the details.
Are There Any Exemptions to Inheritance Tax in New Jersey?
Yes. Certain immediate family members of a decedent are exempt from inheritance tax in New Jersey. These beneficiaries include the decedent’s:
- Spouse or domestic partner
- Biological, step, or adopted child(ren)
- Parent(s)
- Grandparent(s)
- Grandchild(ren) or other direct descendants
These individuals are considered “Class A” beneficiaries.
Also exempt are entities who are considered “Class E” beneficiaries. This area involves charitable contributions. These entities include:
- Hospitals
- Churches
- Libraries
- Scientific institutions
- Educational entities
- The State of New Jersey and its political subdivisions
What About Other Beneficiaries?
Certain other beneficiaries are considered “Class C” beneficiaries in New Jersey. These individuals are only required to pay tax on inheritances valued over $25,000. Class C beneficiaries include the decedent’s:
- Brother or sister
- Son-in-law or daughter-in-law (includes a civil union partner of the decedent’s child)
- Surviving son-in-law or daughter-in-law if decedent’s child has died (includes civil union partners)
Beneficiaries who are not included in Class A, C, or E receive no exemptions. These may include friends or more distant relatives that an individual may want to leave an inheritance for.
Are There Any Other Ways to Avoid the Inheritance Tax?
An
estate planning attorney familiar with New Jersey inheritance tax may help you implement a plan that may help non-exempt beneficiaries avoid the sting of the tax. These strategies can include:
- Securing assets in a trust
- Gifting assets before death
- Forming an irrevocable life insurance trust
Now is the Time to Consider the Inheritance Tax!
The last thing you want to worry about is what will happen with your assets when you pass away. Planning for this eventuality can save time and headaches during difficult times. Trusts are one way to protect your loved ones from taxes that may arise after death while also allowing you more control over how your assets are distributed.
Contact
Tarta Law at
201-444-8448 for more information on these matters, and we’ll help make sure everything goes according to plan. Tarta Law serves the New Jersey Communities of Midland Park, Ridgewood, Glen Rock, Wyckoff, and Franklin Lakes.
Steven W. Tarta, Esq. brings more than 45 years of professional experience to his practice, with a sophisticated focus on Estate Tax Planning, Living Trusts and Elder Law.