21 Aug I’m a Class D beneficiary. Will I owe inheritance tax?

Q. I am a Class D beneficiary who is a named beneficiary on various financial instruments, including life insurance, traditional IRAs, and various fixed and variable annuities that are not IRAs. I am trying to determine which will be taxed under the New Jersey inheritance tax laws.
— Heir

A. The New Jersey inheritance tax is levied based on the relationship between the beneficiary and the deceased. And as you note, some assets are treated differently.

A Class D beneficiary has to pay an inheritance tax of 15% on the first $700,000 that is inherited, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.

Anything over $700,000 is taxed at a rate of 16%.

“Life insurance payable to a Class D beneficiary is exempt from the inheritance tax,” Whitenack said. “Annuity contracts, however, are generally subject to the New Jersey inheritance tax.”

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This story was originally published on Aug. 21, 2023.

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