Will grandchildren owe the inheritance tax?

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Q. If an inheritance is made to a trust that has only grandchildren as beneficiaries, is the inheritance still exempt from inheritance tax?
— Planning

A. Estate planning, especially if you’re trying to avoid the inheritance tax in New Jersey, can be really complicated.

People often put funds in a trust to protect them from certain taxes.

In this case, because you’re talking about grandchildren and not other types of beneficiaries, you should be in the clear.

“The state of New Jersey would be hard pressed to claim that all Class A beneficiaries – which is an exempt class – would be subject to tax just because it runs through a trust,” said Kenneth Bagner, a certified public accountant with Sobel and Co. in Livingston.

But not all beneficiaries are free of the inheritance tax.

We recommend you speak with an estate planning attorney to make sure you’ve covered all your bases here. Once you’re gone, nothing can be done to improve your estate’s tax situation.

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