20 Jan When Christie’s gone, will estate tax return?
Q. Considering the animosity against Gov. Chris Christie, how difficult would it be for the next administration to repeal the repeal of the estate tax?
A. This isn’t really a money question. It’s a politics question.
But it’s one that’s important to all of our finances.
We can’t predict what will happen when the new governor — whoever that will be — takes office in January 2018.
Here’s what we do know.
In the fall of 2016, Gov. Christie signed into law the reduction and repeal of the New Jersey estate tax.
“As of Jan. 1, 2017, the New Jersey estate tax exemption increased from $675,000 to $2 million,” said Patricia Daquila, a certified public accountant with Lassus Wherley in New Providence. “This means when a New Jersey resident dies during 2017, then his or her estate would not be subject to New Jersey estate taxes unless the value of their estate was greater than $2 million.”
If the resident dies on or after Jan. 1, 2018, there would be no state estate tax due.
The deceased’s estate could owe estate taxes on the federal level, but only if the estate is worth more than $5.49 million in 2017. That exemption amount is adjusted annually for inflation.
Even though the state estate tax changed, the bill did not eliminate the state’s inheritance tax, Daquila said.
“The New Jersey inheritance tax may be imposed if a decedent passes their assets to a beneficiary based on the relationship between the beneficiary and the decedent and the amount received,” she said. “There is no inheritance tax imposed if the beneficiary is a parent, grandparent, spouse, child or stepchild, charity, or domestic partner.”
You can learn more about the inheritance tax here.
It is very possible that with a new governor, there could be changes in the state.
“The estate tax could be reinstated, but who we do not have a crystal ball,” Daquila said.
She said there are some strong arguments to reinstate the tax.
Our neighboring states including New York, Connecticut, Maryland, Massachusetts and Delaware all have estate taxes.
Pennsylvania and Maryland have an inheritance tax, she said.
“In fact in 2017, New Jersey and Maryland are the only two states that have both an inheritance and an estate tax,” Daquila said. “However, an estate of a decedent in New Jersey only pays the higher of the New Jersey estate tax or the inheritance tax, not both.”
In 2018, she said, Maryland will be the only state with both estate and inheritance taxes.
According to the New Jersey Office of Legislative Services, the revenue from the estate tax in 2014 exceeded $319 million, and the majority — 59.7 percent — was collected from estates that were worth more than $2.5 million dollars, Daquila said.
“Therefore, New Jersey could reinstate the estate tax with a much higher exemption than the former $675,000 and still benefit with tax revenue,” Daquila said. “It is difficult to predict what the future will hold for the New Jersey estate tax but there are very strong arguments that can be made by a new administration to reinstate it.”
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This post was first published in January 2017.NJMoneyHelp.com 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.