New Jersey: An Expensive Place to Live — and Die

NJ Inheritance Tax
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New Jersey: An Expensive Place to Live — and Die

If you are a New Jersey resident, then you already know how expensive it is to live here. But did you also know that it’s expensive to die in the Garden State? Unless you have recently lost a loved one or have a background in estate planning law, you may be unaware of the various taxes in NJ that could affect your retirement and estate planning.

Currently, New Jersey is one of only two states left (Maryland is the other) in the U.S. that has both an inheritance tax and an estate tax. Many people who were born, raised and have worked in New Jersey are now leaving the state. As residents approach the age of retirement, they begin looking for other locations to spend their golden years — locations like Florida that, in addition to warm weather, have no inheritance or estate tax.

In fact, a recent study by Fairleigh Dickinson University shows that 57 percent of New Jerseyans polled plan on leaving the state as they near the age of retirement because of high taxes and affordability.

New Jersey, as it stands now, imposes an estate tax between 4.2 percent and 16 percent on estates valued at $675,000 or more. This includes the value of real estate, motor vehicles, boats, stocks, bonds and savings and checking accounts.

And then there is the inheritance tax. As of 2014, all charitable organizations are Class E, and are exempt from NJ’s inheritance tax. The balance of beneficiaries are categorized in the following ways:

  • Class A beneficiaries — exempt from the inheritance tax

  1. Spouses
  2. Civil union partners
  3. Domestic partners
  4. Parents
  5. Grandparents
  6. Children (biological, legally adopted, or mutually acknowledged) and step-children of the decedent
  • Class C beneficiaries — first $25,000 of property inherited by someone in Class C is not taxed; the balance of property to a Class C person is taxed at 11% 

  1. Brother or sister of the decedent (including half-brother and half-sister)
  2. Spouse or civil union partner of the decedent’s child
  3. Surviving spouse or civil union partner of the decedent’s predeceased child
  • Class D beneficiaries:   Bequests up to $500 are exempt from inheritance tax; bequests in excess of $500 are taxed in full at 15%

  1. Class D beneficiaries include all other beneficiaries who are not included in Class A or Class C or Class E

As in other states, estate planning laws in New Jersey are constantly changing. In light of the retiree exodus occurring in the Garden State, many residents believe that the estate and inheritance taxes should be repealed. If you would like to receive more detailed information regarding the estate or inheritance tax in NJ, contact Union County estate planning attorney Alec Borenstein, Esq., at alec@bmcestateplanning.com or call 908­236­6457 today.

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