The inheritance tax and where you live

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Q. If a Class D beneficiary is an out-of-state resident and beneficiary of a New Jersey estate, is that person subject to the New Jersey inheritance tax?
— Wondering

A. The pesky inheritance tax causes lots of confusion for those who inherit and those who are planning their estates.

The inheritance tax is based on the residency of the decedent — the person who died — not on the beneficiary.

The estates of New Jersey residents are potentially subject to the inheritance tax, which is based on the relationship of the heir to the decedent, said Yale Hauptman, an estate planning attorney with Hauptman and Hauptman in Livingston.

He said amounts received by Class D beneficiaries are taxed at the rate of 15 percent on the first $700,000 received and then 16 percent on the excess above $700,000.

“Class D beneficiaries are anyone that does not fall within any of the other classes,” Hauptman said. “They typically are nieces, nephews, cousins, stepsiblings, aunts, uncles and non-blood relatives.”

So to summarize, if you are a Class D beneficiary and you live outside of New Jersey, your inheritance is subject to New Jersey inheritance tax, he said.

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This post was originally published in August 2017. 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.