Way to Potentially Minimize Estate Taxes in New Jersey

New Jersey does not have state-based estate taxes, but residents of New Jersey (and all other US states) will need to consider the federal estate tax. It is also important for New Jersey residents to understand the inheritance tax — which is paid by the party inheriting assets — but estate tax is something different. An estate tax is an amount paid by the deceased’s estate before assets are distributed, and it is determined by the total market value of the estate. A large percentage of estates in the country are exempt from the estate tax because their total value is less than the threshold for filing an estate tax return. Each year, the threshold increases slightly. For 2025, the exemption threshold is $13,990,000. What this means is that estate tax will only be owed if your estate has a value that exceeds $13,990,000 (in 2025, or the amount in the future year of your death).

If your value of your estate is likely to exceed the exempt amount, it will be important to discuss potential strategies for minimizing estate taxes with a New Jersey estate planning lawyer. The following are some common strategies for minimizing estate taxes that may be applicable to you.

Gifting and Giving 

Both gifting (to loved ones) and charitable giving are common strategies for minimizing estate taxes. In terms of gifting to loved ones, you can gift up to $19,000 per year as of 2025 without incurring a gift tax. That amount is doubled to $38,000 for a married couple. How can this minimize estate taxes? Rather than leaving thousands of dollars to a loved one after your death, you can make annual gifts to a loved one, up to the amount they would have received, without incurring a gift tax (as long as the amount is below $19,000 annually, or doubled for a married couple), and that amount will reduce the total size of your estate upon your death.

Charitable giving, if you plan to do it, is also a way to reduce estate taxes. You can donate assets directly or set up a charitable remainder trust.

Creating Trusts 

Trusts are among the most common estate planning tools for minimizing estate taxes. Depending on your particular financial circumstances, you may be able to set up certain types of trusts, where the assets can be excluded from the total value of your taxable estate. For example, you might set up an irrevocable life insurance trust (ILIT), which holds the value of your life insurance payout so that it is not included in the total value of your estate. Or, you might consider a credit shelter trust, also known as an B trust or bypass trust, which allows married couples to maximize estate tax exemptions.

Contact a Summit, New Jersey Estate Planning Attorney 

Do you have questions about estate taxes and plans you can make now to minimize those taxes on your estate? One of the experienced Summit estate planning attorneys at Dempsey, Dempsey & Sheehan can discuss your options with you today. For some New Jersey residents, it will be important to use a range of options available to minimize estate taxes, particularly for large estates. Contact our firm today to learn more about the options for minimizing estate taxes that may be available to you, and to begin working on putting them into place.

Sources:

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

law.cornell.edu/wex/credit_shelter_trust