HOW THE NEW JERSEY INHERITANCE TAX WORKS

By: BENJAMIN D. ECKMAN, ESQ.
Elder Law Attorney

In addition to a state estate tax on all assets over $675,000 New Jersey also has an inheritance tax. When a New Jersey resident dies, his or her assets will be taxed on the basis of who inherits the assets as well as value of the estate.

No Tax on Most Inheritances

For most estates, there will be no tax. If a decedent’s estate goes to a spouse, child, parent, grandchild, grandparent or stepchild, no tax is due. These beneficiaries are called “Class A” beneficiaries. If a decedent leaves money to a charity, and educational institution, a hospital, a library or the State of New Jersey or its political subdivisions, no tax is due.

Recipients That Pay Tax

If property is given to other family members, such as a brother, sister, wife or widow of a son or husband, or husband or widower of a daughter, the first $25,000 is not taxed. The balance of the inheritance is taxed at 11% up to $1,100,000, and thereafter at rates that range from 13% to 16%. All other beneficiaries (persons not included in the above definitions of family) are taxed at 15% for the first $700,000, and at 16% thereafter. There is a $500 per person exemption on property given to these other beneficiaries.

Approvals Required to Transfer Certain Assets; Forms

Some assets require the written consent of the director, Division of Taxation before they can be transferred. These assets include real estate, stocks (if the corporation is incorporated in the State of New Jersey) and bank accounts located in the State of New Jersey. No waivers are required to transfer cars, stocks in companies not incorporated in New Jersey, personal property such as household goods and jewelry, and most employee benefits.

If the beneficiaries of an estate are designated Class “A”: spouse, child, parent, grandparent, grandchild or stepchild, then a Self-Executing Waiver, Form L-8, can be executed to transfer bank accounts, and/or stocks and bonds. The Self-Executing Waiver, Form L-8, is filed with the banking institution or broker where the asset is located.

Real Estate

Class “A” beneficiaries can transfer real estate by executing Form L-9. This form must be filed in Trenton with the Inheritance Tax Branch. There is one exception to the requirement to have a tax waiver to transfer real estate. If a husband and wife own real estate as tenants by entirety, the survivor does not need to file Form L-9 and can transfer the property anytime he or she wants.

Benjamin D. Eckman, Esq. concentrates his practice on Elder Law & Estate Planning. Elder law is intended to broadly assist “extended living”. An elder law practitioner provides the legal information necessary for persons whose lives will extend or have already extended beyond the time when all children are usually out of the house and when regular employment ceases. After the elder law attorney and client complete their work, legal documents have been drafted, tax considerations have been analyzed, and a plan to protect the elder’s estate has been implemented.

Benjamin D. Eckman’s practice focuses on Estate Planning & Elder Law – legal issues facing senior citizens. Benjamin D. Eckman received his Bachelor’s Degree in Business/Accounting from Touro College and his law degree from Seton Hall University School of Law. He is a member of the New York State Bar Association, the New Jersey State Bar Association, the National Academy of Elder Law Attorneys, the Elder Law Section and Real Property, Probate and Trust Section of the New Jersey State Bar Association, the Union County Bar Association, Passaic County Bar Association and the Bergen County Bar Association. He can be reached at (973) 709-0909, (908) 206-1000 or (201) 263-9161.