11 Aug Should elderly parents move to avoid inheritance taxes?

Q. If elderly parents have, say, several million dollars in retirement investments, what would be the best way to leave most of it to their children without them having to pay an inheritance tax as would be the case in New Jersey? Would it be better to move to a more friendly tax state or perhaps give most or all of the planned “inheritance” before their demise?
— Planning

A. First, you are working off of a wrong assumption.

It’s a mistake you’ll be happy to hear you made.

First, New Jersey eliminated its estate tax of 2018, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.

Next, New Jersey does not impose an inheritance tax on assets that are inherited by direct descendants, she said.

“Moreover, if the assets are held in traditional IRAs or other tax-advantaged qualified savings programs such as 401(k)s, transferring such assets during lifetime will trigger a substantial income tax,” she said.

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This story was originally published on Aug. 11, 2023.

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