New Jersey inheritance tax

If you live in New Jersey, then you’re lucky enough to live in one of the two states that collects both a separate state inheritance tax and estate tax (the other is Maryland). Currently the following rules apply with regard to the New Jersey inheritance tax:

•Charitable organizations are exempt from the tax.
•All other beneficiaries are broken down into three categories with regard to the tax:
•Class A beneficiaries. No tax is imposed on the following beneficiaries – spouses, civil union partners, domestic partners, parents, grandparents, and descendants (including those legally adopted).
•Class B beneficiaries. This class no longer exists.
•Class C beneficiaries. For the following beneficiaries – siblings, spouse or widow(er) of a child of the decedent, and civil union partner or surviving civil union partner of a child of the decedent – the first $25,000 is exempt and transfers above this amount are taxed at 11%–16%.
•Class D beneficiaries. For all other beneficiaires, the first $500 is exempt and transfers above this amount are taxed at 15%–16%.
•Life insurance paid to a named beneficiary is exempt from the tax.
•An inheritance tax return, Form IT-R for residents or Form IT-NR for nonresidents, must be filed and the tax paid within eight months after the decedent’s death.
•While no inheritance tax return is required to be filed for Class A beneficiaries, Form L-8 may be used to secure the release of bank accounts, stocks, bonds and brokerage accounts. If there was any real property in the name of the decedent, Form L-9, or Form L-9NR for a nonresident decedent, may be filed to release the State’s lien on the real property.

The bottom line – if you’re a New Jersey resident and your estate is passing to someone other than your immediate family, or if you’re a nonresident who owns real estate and/or tangible personal property located in New Jersey and it’s not passing to your immediate family, then your beneficiaries may owe a New Jersey transfer inheritance tax.

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