Are 401(k) plans subject to the inheritance tax?


Q. Are 401(k) retirement accounts subject to the New Jersey inheritance tax?
— Beneficiary

A. For starters, New Jersey no longer has an estate tax.

For the inheritance tax, though, it’s not about the type of asset, but rather, the relationship of the deceased to the beneficiary.

A New Jersey inheritance tax is imposed when the assets are inherited from a decedent who was a New Jersey resident at the time of death, the beneficiary is not a Class A beneficiary — namely, a spouse, domestic or civil partner, grandparent, parent, child, grandchild or stepchild — or a charity and the asset is not exempt, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.

The tax also is imposed if the decedent was a non-resident of New Jersey but owned real property in New Jersey, she said.

“A 401(k) account is not an exempt asset for purposes of the New Jersey inheritance tax,” Whitenack said.

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This story was originally published on Nov. 6, 2023. 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.