Inheritance and Estate Taxes: What to Know for Estate Planning

If you have a high net worth estate, it is essential to discuss inheritance and estate taxes with your estate planning lawyer in Summit. New Jersey has a state inheritance tax, and a federal estate tax may apply, depending on the value of your estate. Some people and entities are exempt from the inheritance tax, while others will be responsible for an inheritance tax based on their relationship to the deceased and the amount they are inheriting. Our Summit estate planning lawyers can explain in more detail.

Understanding the Inheritance Tax in New Jersey

Inheritance taxes in New Jersey are based on the beneficiary and the beneficiary’s relationship to the deceased. The inheritance tax for individuals who own assets in New Jersey or reside part-time in New Jersey will depend on where the person was a resident at the time of their death — there are resident and non-resident estate taxes.

Certain family members are exempt from the inheritance tax in New Jersey, including a spouse, domestic partner, child, grandchild, and parent. Then, other beneficiaries are placed into classes that have their own specific tax rates, and those tax rates increase based on the amount inherited. Charities and various nonprofits are also exempt from inheritance taxes. To determine whether and what a loved one is likely to pay in an inheritance tax, and potential ways to minimize such taxes, you should seek advice from your estate planning lawyer.

Estate Taxes in New Jersey

 New Jersey does not have a state estate tax, similar to most other states in the country. The estate tax was eliminated for anyone who died on or after January 1, 2018. Accordingly, if you speak with a friend or family member who inherited assets from a loved one prior to that date, they might mention the estate tax to you. It is important to be clear that you will not need to consider the New Jersey Estate Tax in your estate plan.

However, you may still need to consider the federal estate tax. As the IRS explains, the federal estate tax is “a tax on your right to transfer property at your death,” and whether or not you will be subject to the federal estate tax will depend on your “gross estate,” which includes the fair market value of all of your assets. The exemption increases each year (meaning that there is no estate tax if the amount is at or less than the cited exemption amount). In 2025, the estate tax applies only if the estate exceeds $13,990,000.

Contact a Summit Estate Planning Attorney 

Inheritance taxes in New Jersey can be complicated, and there may be ways to minimize these taxes with assistance from an estate planning lawyer, depending on your particular circumstances. It is essential to discuss your financial situation with one of the experienced New Jersey estate planning attorneys at Dempsey, Dempsey & Sheehan to find out more about minimizing inheritance taxes and helping your loved ones to plan ahead. Contact us today to find out more about how we can assist you with a wide range of estate planning matters, including planning for inheritance and estate taxes.

Sources:

nj.gov/treasury/taxation/inheritance-estate/inheritance.shtml

irs.gov/businesses/small-businesses-self-employed/estate-tax