New Jersey has no estate tax. It was repealed for anyone who died on or after January 1, 2018. Two taxes still matter for large New Jersey estates, though. The state's inheritance tax applies to many beneficiaries outside the immediate family. The federal estate tax applies to estates worth more than $15 million per person in 2026. [Review for accuracy: time-sensitive claim]
The federal picture changed in 2025. Congress made the higher federal exemption permanent, so the drop many families were planning around never happened. Here's where things stand now, and what that means for your plan.
Key Takeaways
- New Jersey's estate tax ended for deaths on or after January 1, 2018.
- New Jersey still has an inheritance tax. Spouses, children, grandchildren, and parents are exempt. Siblings, nieces, nephews, and friends may owe it.
- The federal estate tax exemption is $15 million per person in 2026, or $30 million for a married couple with proper planning. [Review for accuracy: time-sensitive claim]
- The 2025 federal law removed the scheduled "sunset." The exemption no longer drops after 2025, and it adjusts for inflation starting in 2027.
- Wills and trusts written before 2018, or built around the old sunset, may be worth a fresh look.
Does New Jersey Have an Estate Tax in 2026?
No. New Jersey's estate tax does not apply to anyone who died on or after January 1, 2018.
The state phased the tax out under a 2016 tax reform law. Here's how it changed:
- Before 2017: Estates worth more than $675,000 were taxed. That was one of the lowest thresholds in the country.
- 2017: The exemption rose to $2 million.
- January 1, 2018 and after: No New Jersey estate tax.
The repeal didn't remove every state tax at death. New Jersey kept its inheritance tax, which works very differently. We cover it below.
What Is the Federal Estate Tax Exemption for 2026?
The federal estate tax exemption is $15 million per person for deaths in 2026. A married couple can protect up to $30 million when the plan is set up correctly. [Review for accuracy: time-sensitive claim]
Estates below the exemption owe no federal estate tax. Amounts above it can be taxed at rates up to 40%.
The exemption also covers lifetime gifts. Large gifts you make during your life count against the same $15 million amount. This is often called the unified gift and estate tax exemption.
What Happened to the 2025 "Sunset"?
The sunset no longer applies. Under the 2017 federal tax law, the exemption was set to drop to about $5 million (adjusted for inflation) after 2025. The One Big Beautiful Bill Act, signed in July 2025, replaced that rule. It set the exemption at $15 million for 2026 and removed the scheduled expiration. [Review for accuracy: time-sensitive claim]
"Permanent" here means there's no built-in end date. Congress can still change the law in the future, so it's worth keeping an eye on.
How Does Portability Work for Married Couples?
Portability lets a surviving spouse use whatever federal exemption the first spouse didn't use. Combined, that can protect up to $30 million in 2026.
There's a catch. Portability isn't automatic. The executor generally has to file a federal estate tax return (IRS Form 706) after the first spouse dies to claim it, even if no tax is owed. Skipping that filing can leave millions of dollars of exemption unused. [Review for accuracy: time-sensitive claim]
You can read the IRS's current exemption figures on its estate and gift tax page.
New Jersey Estate Tax vs. Inheritance Tax vs. Federal Estate Tax
These three taxes are easy to mix up. This table shows how they compare.
| NJ Estate Tax | NJ Inheritance Tax | Federal Estate Tax | |
|---|---|---|---|
| Still in effect? | No, repealed for deaths on or after 1/1/2018 | Yes | Yes |
| What it's based on | Total value of the estate | Who inherits and their relationship to the person who died | Total value of the estate |
| Exemption | None (tax no longer applies) | Depends on beneficiary class | $15 million per person (2026) |
| Top rate | Not applicable | 16% | 40% |
Who Pays New Jersey Inheritance Tax?
New Jersey's inheritance tax depends on who receives the money. Close family members pay nothing. More distant relatives and friends can owe 11% to 16%. [Review for accuracy: time-sensitive claim]
The state sorts beneficiaries into classes:
| Class | Who's included | Exemption | Tax rate |
|---|---|---|---|
| Class A | Spouses, civil union partners, registered domestic partners, children, stepchildren, grandchildren, parents, grandparents | Fully exempt | 0% |
| Class C | Siblings, sons-in-law, daughters-in-law | First $25,000 | 11% to 16% |
| Class D | Nieces, nephews, friends, and anyone not in another class | None | 15% to 16% |
| Class E | Charities and qualifying nonprofits | Fully exempt | 0% |
A few details catch families off guard:
- Step-grandchildren are not Class A. Stepchildren are exempt, but their children are not.
- Class C rates climb in steps. After the first $25,000, the rate is 11% on the next $1,075,000, then 13%, 14%, and 16% on amounts above $1.7 million.
- Class D has no exemption. The tax is 15% on the first $700,000 and 16% above that.
- Gifts made within three years of death may be pulled back in and taxed as if they were inherited.
- The return and payment are generally due eight months after death.
For a deeper look, including a calculator, see our guide on whether you have to pay New Jersey inheritance tax. The New Jersey Division of Taxation also publishes current rules on its inheritance and estate tax page.
How Can a Large New Jersey Estate Reduce Taxes?
Most large estates use a mix of lifetime gifts, trusts, and careful beneficiary choices. The right mix depends on the size of your estate and who you plan to leave it to.
Lifetime Gifts
In 2026, you can give up to $19,000 per person per year without touching your lifetime exemption. A married couple can give $38,000 per recipient. Over several years, this can move a meaningful amount out of a large estate. [Review for accuracy: time-sensitive claim]
New Jersey has no separate gift tax. Keep the three-year rule in mind, though. Gifts to Class C or D beneficiaries made shortly before death may still face inheritance tax.
Trusts for Large Estates
Several trust types can help a large estate manage federal tax exposure:
- Credit shelter trusts (also called bypass trusts) let married couples use both spouses' exemptions while controlling who receives the assets in the end.
- Irrevocable life insurance trusts keep life insurance proceeds out of your taxable estate. See our article on whether life insurance is taxable to the beneficiary.
- Qualified personal residence trusts move a home to your heirs at a reduced gift value while you keep living there. We compare the options in QPRT vs. PRT: which is right for you.
- Charitable remainder trusts pay you income during your life, then pass what's left to charity.
For more on how each one works, see our guide to trusts for tax planning in New Jersey.
Charitable Giving
Gifts to charity reduce the size of your taxable estate. They're also fully exempt from New Jersey inheritance tax, since charities are Class E beneficiaries. Donating appreciated assets can also help you avoid capital gains tax on the growth.
Should You Update an Older Estate Plan?
In many cases, yes. Plans written under older rules may no longer fit the current tax picture. [Benjamin to confirm: A-1]
Two situations are worth a closer look:
- Plans written before 2018. Some older wills and trusts use tax formulas built around the old New Jersey estate tax. Now that the tax is gone, those formulas can split assets in ways you didn't intend.
- Plans built around the 2025 sunset. If you made large gifts or set up trusts to beat a deadline that no longer exists, it may make sense to review whether those choices still serve your goals.
For many families below the federal exemption, the focus has shifted. Income tax on inherited assets often matters more now than estate tax. Our article on step-up in basis explains how heirs can reduce capital gains tax on inherited property.
A plan also covers more than taxes. Family relationships, blended families, business succession, and charitable goals all shape how your estate should pass.
Attorney Benjamin Eckman has helped New Jersey families plan their estates since 1995. If your plan was written before 2018 or before the 2025 tax changes, schedule a consultation to see whether it still does what you want.
Frequently Asked Questions
Does New Jersey have an estate tax in 2026?
No. New Jersey's estate tax was repealed for deaths on or after January 1, 2018. The state still has an inheritance tax, which applies to some beneficiaries based on their relationship to the person who died.
What is the federal estate tax exemption for 2026?
The federal estate tax exemption is $15 million per person for deaths in 2026. Married couples can protect up to $30 million with proper planning, including a portability election. The amount adjusts for inflation starting in 2027.
Is the federal estate tax exemption still going to drop?
No. The scheduled drop after 2025 was cancelled by the One Big Beautiful Bill Act in July 2025. The law has no built-in expiration date, although Congress could change it in the future.
Who is exempt from New Jersey inheritance tax?
Spouses, civil union partners, registered domestic partners, children, stepchildren, grandchildren, parents, and grandparents are fully exempt. So are charities. Step-grandchildren are not exempt.
How much is New Jersey inheritance tax for siblings?
Siblings and sons- or daughters-in-law pay nothing on the first $25,000. Amounts above that are taxed at rates from 11% to 16%, depending on how much they inherit.
Can I give money away to avoid New Jersey inheritance tax?
Lifetime gifts can reduce an estate, but timing matters. Gifts made within three years of death may be treated as part of the estate for inheritance tax purposes. Gifts to exempt beneficiaries, like children or charities, aren't subject to the tax.
This article is for general information only and is not legal advice. Tax laws change, so please speak with an attorney about your specific situation.
