What are New Jersey’s estate and inheritance taxes when someone dies?

When a loved one dies, receiving what's rightfully yours can be costly.

The rules related to state and inheritance taxes vary from state to state. New Jersey today, compared to just a few years ago, is a bit gentler on the friends and family left behind.

Below is a rundown of the New Jersey taxes related to transferring one's property after they've passed, crafted with some help from Lauren Bercik, an attorney with Bercik Law in Shrewsbury.

Do I need to pay an estate tax in New Jersey?

Chances are, the answer is no.

As of Jan. 1, 2018, New Jersey's estate tax was zero for anyone who dies on or after that date.

The tax was phased out in two parts. Prior to Dec. 31, 2016, one's estate was taxed for any total greater than $675,000. The exemption was bumped up to $2 million in 2017, before shifting to zero.

Bercik said that move by the state was a "huge money saver" for New Jerseyans. New Jersey has the ability to increase the estate tax down the road, she noted.

A federal estate tax still exists, but it only kicks in when the total value of one's assets reaches more than $12 million.

"You have to be in the upper income bracket to even be thinking about federal estate tax," Bercik said.

What's the inheritance tax in New Jersey?

The inheritance tax is still alive and well in the Garden State. This tax is imposed on the property transferred from a deceased person to a beneficiary.

The rate of the tax is based on the current value of the property, not the value of the property when it was first purchased or acquired.

"It's a quite creative tax, in my opinion," Bercik said.

What makes this tax most "creative" is that the rate shifts based on the beneficiary's relation to the deceased. While lineal descendants, like one's children and parents, as well as one's spouse, wouldn't be subject to the tax, the decedent's siblings would be, at rates between 11% and 16%.

According to Bercik, the "cash cow" for the state is the Class D beneficiaries. These would be family members such as nieces and uncles, or unrelated people such as friends and neighbors.

"More importantly, it could be unmarried couples," she said.

Those in Class D who receive property would be taxed 15% for any property valued up to $700,000, and 16% for assets totaling more than $700,000.

Dino Flammia is a reporter for New Jersey 101.5. You can reach him at dino.flammia@townsquaremedia.com

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