New Jersey legislatures consider proposals to cut back on estate taxes
A number of proposals are under consideration that could lead to the end of death taxes in New Jersey.
New Jersey may have the most extreme “death” taxes in the United States. In fact, a recent article in Forbes listed New Jersey as one of the top states not to die in during 2015. An article in USA Today also notes “no state in the nation levies taxes when people die as aggressively as New Jersey.” Even Governor Chris Christie has voiced support for removing these taxes. In response, a number of proposals are currently under consideration that could change the workings of death taxes in the state.
Those in favor of the proposals argue a change is long overdue. New Jersey has the lowest state exemption amount, issuing a tax on estates that have a value over $675,000. New Jersey is also one of only two states, Maine being the other, which imposes two different state taxes on the transfer of an estate: estate tax and inheritance tax.
More on the inheritance and estate taxes
As noted above, the state’s estate tax kicks in on estates valued over $675,000. This may seem like a large amount, but it is significantly lower than the federal estate tax which applies to properties valued over $5.43 million.
The second imposed death tax, the inheritance tax, varies depending on the relationship of the beneficiary. Those that are considered class A beneficiaries are not taxed. Examples of class A beneficiaries include parents, grandparents, children, spouses, civil union partners or domestic partners. Class C beneficiaries are taxed at 11 to 16 percent with the first $25,000 exempt. This class includes siblings and the spouse of a child of the decedent. Class D beneficiaries, those otherwise not mentioned, are taxed at 15 to 16 percent if transfer value is over $500. Charitable organizations are exempt. Additional exemptions can also apply depending on the details of the transfer.
Importance of legal counsel
The considerations for changing the state’s estate and inheritance tax system are not the only potential change. There are also proposals under consideration that would abolish the federal estate tax as well.
These are just a few of the examples that highlight the need for an estate planning attorney. Your attorney will not only keep apprised of changes in applicable law, but also help you to either develop or update an estate plan to take advantage of these changes while discussing various options that can help lessen the tax burden on the estate. This can include gifting, the use of trusts and other legal tools.
Keywords: estate planning