23 Jul Will N.J. or Florida’s tax laws affect this inheritance?

Q. I am a resident of Florida. I would like to leave my condo in Florida to my friend’s daughter, who I consider my step-daughter, after my death. She is a resident of New Jersey and they would use the condo as a vacation home. Will she be considered my daughter for tax purposes, and which state’s tax laws will count?
— Not married

A. First, the fact that you’re not legally married is important. More on that in a moment.

If you are a Florida resident, Florida rules will matter here.

Florida has no inheritance tax, and it doesn’t matter where the beneficiary lives. New Jersey won’t tax a Florida inheritance.

New Jersey does have an inheritance tax, but the state has no right to tax inheritances for New Jersey residents if the assets come from an out-of-state estate.

If you did live in New Jersey, there is no inheritance tax on “Class A” beneficiaries, which include spouses, children, grandchildren and step-children.

But the issue here is that your “daughter” isn’t legally your daughter, and would be treated by the tax rules as a friend.

“You can call it what you want. Legally, you are not married to your friend and you have no legal relationship with her daughter, either,” said Nancy Heslin Reading, an estate planning attorney with Reading Law Firm in Newton.

Therefore, courts and taxing authorities will treat both persons as non-family, she said.

You should speak to an estate planning attorney who is well-versed in both Florida and New Jersey law to see if there are any protections available to you.

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This story was originally published on July 23, 2020.

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.