Will stepchildren owe the inheritance tax?

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Q. Regarding inheritances and stepchildren: Say a man is married three times. Marriage No. 1 results in two biological children, Marriage No. 2 brings three stepchildren and Marriage No. 3 brings no children. Are the children from Marriage No. 2 considered Class A beneficiaries?
— Stepparent

A. When you’re talking inheritances in New Jersey, so-called Class A beneficiaries can receive transfers at death with no inheritance tax.

Class A beneficiaries include a spouse, civil union or domestic partner, parents, grandparents, children – including adopted children – and their descendants, stepchildren and a mutually-acknowledged child as defined in the statute, said Catherine Romania,an estate planning attorney with Witman Stadtmauer in Florham Park.

She said step-grandchildren are not Class A beneficiaries, although legislation has been introduced to make them Class A beneficiaries.

A stepchild is defined in the definition section of the law as “a child of the surviving, deceased, or former spouse who is not a child of the decedent.”

“It does not stipulate that the decedent must not remarry in order for the child of the former spouse to remain a stepchild,” Romania said. “Moreover, unlike other states such as Iowa, in which the stepchild’s status derives from the marriage and thus ends on divorce, the definition indicates that the child of a former spouse remains a stepchild and thus a Class A beneficiary.”

Based on your facts, it appears the children from Marriage No. 2 are still considered Class A beneficiaries.

Romania said consideration should also be given to qualification as a mutually acknowledged child if the decedent, for not less than 10 years prior to the transfer, stood in a mutually acknowledged relation of a parent, provided the relationship began before the child’s 15th birthday and was continuous for 10 years thereafter.

To learn more about the inheritance tax, read this story.

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