Inheritance Law > Does Your State Collect an Inheritance Tax? > New Jersey
New Jersey State Inheritance Tax
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In New Jersey, there's an inheritance tax. (The estate tax was repealed in 2018).
The inheritance tax falls on estates worth more than $25,000, but affects only certain heirs, not all.
Close relatives, such as the surviving spouse, parents, children and grandchilden are entirely exempt, which means that these close relatives will not pay any state inheritance tax, regardless of the size of the inheritance.
Other relatives (such as siblings and the spouses or partners of deceased children) are taxed on inheritances over $25,000. The rate starts at 11% and rises to 16%, depending upon the amount inherited.
Everyone else, except for charities, is taxed at a rate of 15% for the first $700,000 and 16% for amounts over that.
These state-specific inheritance taxes are in addtion to the federal estate tax. There is an exemption of $10 million, which is indexed to inflation and is currently $11,400,000, and only people who die with an estate larger than that exemption will have to pay federal estate tax. It is estimated that only the richest .14% of Americans will be subject to the estate tax at all, or only two out of every 1,000 people who die.
If someone dies in New Jersey with less than the exemption amount (currently $11,400,000), their estate doesn't owe any federal estate tax. The heirs and beneficiaries inherit the property free of federal tax. They don't pay income tax on it, either, because inherited property is not ordinary income. The only exception to this are inherited retirement accounts, which are subject to income tax as the assets are withdrawn.
Information and tax forms can be found at New Jersey's Division of Revenue's website.
About Liza Hanks
Liza Hanks is a partner at GCA Law Partners LLP in Mountain View, California, where she practices estate planning, trust administration, and probate law. She’s the author of Every Californian’s Guide to Estate Planning: Wills, Trusts & Everything Else and The Trustee’s Legal Companion (with Attorney Carol Zolla) and she writes about estate planning and inheritance law here at Legal Consumer. Liza is a graduate of Stanford Law School, a former magazine editor, and the mother of two children (neither of whom show any desire to become attorneys).
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