13 Feb I’m leaving assets to siblings and friends. What should I know?

Q. I’m single and have no children. I have a will where I leave my house to my siblings and divide my estate up in percentages to my siblings and a few other friends and family. All my brokerage accounts, bank accounts, annuities and life insurance are left to my estate. I thought this would be easier on the executors. Just wondering your opinion.
— Planning

A. We’re glad to hear you’re planning ahead.

We’re going to assume the attorney you worked with considered your intent, your assets and the tax issues to consider.

Because you are leaving your assets to your siblings and friends — non-Class A beneficiaries — there will be New Jersey inheritance tax incurred at the rate of between 11 and 16%, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park.

She said the executor will be responsible to ensure this tax is paid and can be held personally liable for the tax if estate assets are distributed without payment.

“Where there are accounts with named beneficiaries, such as payable on death, or where there are illiquid assets paid to beneficiaries, it is sometimes difficult for the executor to arrange for the payment of the tax because the account is not within the executor’s control or not assessable,” Romania said. “By leaving everything to the estate, and then directing whether the tax should be allocated in proportion to the beneficiaries’ share and paid out of their shares, or from the estate without allocation, it allows the executor the access and control to make the tax payment before a final distribution to the beneficiaries.”

If life insurance is paid directly to a named beneficiary, no inheritance tax will be owed on the life insurance paid, even if that beneficiary is not a Class A beneficiary, Romania said. For that reason, it is generally beneficial to have life insurance divided among the non-Class A beneficiaries you wish to benefit instead of having it paid to your estate, she said.

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This story was originally published in February 2025.

NJMoneyHelp.com 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.