New Jersey Estate Tax vs. Inheritance Tax

Posted on: August 25th, 2014 by Mark R. Friedman

Since the only certainties in life are death and taxes, today I’ll cover New Jersey’s death taxes.  If you die in New Jersey, you face two potential taxes – estate tax, and inheritance tax.  Most states only have one or the other, but New Jersey residents are subject to both.  What is the difference between the two?

Estate tax is a tax on your estate – on what property you own when you die.  It is determined by looking at how much you own on the date of death.  If your total assets exceed $675,000 (after deducting expenses like funeral costs and legal fees), then you owe New Jersey estate tax.

(Note that New Jersey estate tax is different from federal estate tax, which is imposed on estates above $5.34 million and has a much higher tax rate.)

Inheritance tax is a tax on your heirs.  It is determined by looking at to whom you leave your property.  Whether by will or intestacy, if any of your property passes to anyone other than your spouse, child, grandchild, parent or step-child, then you owe inheritance tax.  You should be aware of inheritance tax if you are considering leaving property to a sibling, cousin, nephew, niece, unmarried romantic partner or friend.

A simple way to distinguish these taxes is that estate tax is on property (your estate), while inheritance tax is on people (your heirs).  Estate tax applies to your whole estate, while inheritance tax is imposed only on specific transfers to certain people.

At FriedmanLaw we can help your craft an estate plan that minimizes both estate and inheritance tax.  Please see our Practice Areas and Q&A sections for more info, or call us today at (908) 704-1900 to make an appointment.

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