11 Apr Are bonds and life insurance subject to inheritance tax?

Q. My aunt passed away last year and lovingly named my siblings and me as beneficiaries. What assets are included for the New Jersey inheritance tax? For example, should life insurance benefits and Series EE Savings Bonds be included? The Division of Taxation is currently the inheritance tax filing and we included the life insurance and the bonds, but someone recently told me taxes shouldn’t be paid on these assets. What’s right and can we amend the filing?
— Beneficiary

A. We’re sorry to hear about your aunt.

And yes, it you may have made an error.

“The proceeds of any contract of insurance insuring the life of a resident or nonresident decedent paid or payable, by reason of the death of such decedent, to one or more named beneficiaries other than the estate, executor or administrator of such decedent are exempt for New Jersey inheritance tax purposes,” said Martin Hauptman, partner in the trust and estates and tax law practice groups at Mandelbaum Barrett, P.C. in Roseland.

So you need to look back at the insurance policy to see if you and your siblings, or the estate itself, was named as the beneficiary of the policy.

U.S. Savings Bonds, though, are subject to New Jersey inheritance tax, Hauptman said.

If you made errors, you can indeed amend the return.

We recommend you work with a tax professional to make sure it’s completed correctly to make sure you’re not paying a tax that is not due.

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This story was originally published in April 2024.

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