21 Dec My neighbor left me an inheritance. Do I owe inheritance tax?
Q. My neighbor recently passed away and left me as the sole beneficiary on her life insurance policy. I was told this makes me a Class D beneficiary in terms of New Jersey taxes. Is this correct?
A. We’re sorry to hear about your neighbor.
You don’t have to worry about taxes on this inheritance.
Life insurance paid to a named beneficiary regardless of class is exempt from the New Jersey inheritance tax, Martin Hauptman, partner in the trust and estates and tax law practice groups at Mandelbaum Barrett, P.C. in Roseland.
For assets that are subject to the tax, the tax is based on the relationship of the beneficiary to the decedent, he said.
Class A beneficiaries include a parent, grandparent, spouse, child of a decedent, including legally adopted child, grandchild and great-grandchild of a decedent, he said. It also includes a stepchild of a decedent, but not a step-grandchild or great-step grandchild. It also includes a mutually acknowledged child, civil union partner (after Feb. 19, 2007) and a domestic partner (after July 10, 2004), he said.
Class C beneficiaries include a brother or sister of a decedent, a spouse or surviving spouse of a child of a decedent and a civil union partner or surviving civil union partner (after 2/19/2007) of a child of a decedent, he said.
Class D is anyone not included in Classes A, C, or E, including nieces and nephews, and Class E includes qualified charities, religious institutions, educational and medical institutions, non-profit benevolent or scientific institutions, the State of New Jersey or any of its political subdivisions, Hauptman said.
You can learn more on the state’s website.
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This story was originally published on Dec. 21, 2022.
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