Changes for the NJ estate tax

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Q. Now that the estate tax is being phased out, what is meant that it benefits the top 4 percent? Please address the new estate tax exemption.
— Planning ahead

A. The estate tax in New Jersey is one of the reasons many people decide to leave the state.

That’s because while the federal government has increased its estate tax exemption to more than $5 million, New Jersey has stuck with $675,000.

That means anyone who dies with assets worth more than $675,000 will have estates subject to the tax.

That may sound like a lot of money, but if you own even a modest home in the northern part of the state, you’ll probably hit the $675,000 threshold.

Now, the 4 percent statistic you stated comes from data by New Jersey Policy Perspective, which says about 4 percent of estates in New Jersey pay the tax.

And over the last three years, according to state figures, only 94 estates paid 41 percent of all estate taxes paid in the state.

But now, the estate tax in New Jersey is changing as part of the bill that raised the gas tax in the state.

When Gov. Christie signs the bill, the exemption will rise to $2 million for estate who die in 2017, and then the state estate tax will be eliminated for anyone who dies on or after Jan. 1, 2018, said Yale Hauptman, an estate planning attorney with Hauptman and Hauptman in Livingston.

“The estate tax is a graduated tax, meaning that higher valued estates pay more in taxes,” Hauptman said. “Because average home values in New Jersey are so high and the exemption amount is so low, many moderately sized estates have faced an estate tax bill. That will change.”

New Jersey, however, has a second “death” tax.

It’s the inheritance tax, which is assessed based on the relationship of the heirs to the person who died.

Hauptman said Class A beneficiaries — which include spouses, parents and grandparents and lineal descendants such as children and grandchildren — are not subject to inheritance tax.

More distant relatives and non-relatives will still face that tax, which ranges from 11 to 16 percent of the inheritance received.

“There have been no reports in the media about the inheritance tax being eliminated so it is safe to say that this tax will be unaffected by the new changes to the estate tax,” Hauptman said.

What does this mean for the average New Jersey resident?

“If you have a spouse and/or children who will be the recipients of your estate when you die, then the inheritance tax is of no concern to you or your heirs and your estate will soon owe no estate tax,” Hauptman said. “If you have no Class A beneficiaries and must name other non-Class A beneficiaries, then they will still owe inheritance tax.”

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This post was first published in October 2016. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.