With the Gas Tax Bill Comes the Elimination of the NJ Estate Tax

With the Gas Tax Bill Comes the Elimination of the NJ Estate Tax

By Wiss (511 words)
Posted in Estate and Business Succession Planning on October 14, 2016

There are (0) comments.

By Ruth Raftery

The much discussed bill raising the New Jersey gas tax by 23 cents per gallon was signed by Governor Christie on Friday October 14th.  Although not as widely publicized, the new law provides for another major change – the complete elimination of the New Jersey state estate tax.      

Up to now, and for the remainder of 2016, New Jersey has the lowest estate tax exemption in the country, subjecting estates worth more than $675,000 to estate tax at the time of death. By way of comparison, federal estate tax only applies to estates valued at more than $5,450,000 (this is the 2016 amount which will increase annually for inflation). Under the terms of the new law, the New Jersey estate tax will be imposed on estates worth over $2 million in 2017 and then completely eliminated for decedents dying after Jan 1, 2018.

Note that although the estate tax will be eliminated, the New Jersey inheritance tax will continue to apply when property is inherited by anyone other than spouses, parents, grandparents, descendants or charities.  With some exceptions, the inheritance tax is imposed on siblings and other beneficiaries who inherit assets from New Jersey decedents or who inherit real estate and other tangible property located in New Jersey even if the decedent was not a New Jersey resident. The tax ranges from 11% - 18% of the value of the inherited property.      

Currently, only fifteen states and the District of Columbia have an estate tax, and only six have an inheritance tax. Up to now, New Jersey had both. By eliminating its Estate Tax, New Jersey becomes a more attractive place for wealthy retirees to settle. The tax on estates over $675,000 was a real burden on New Jersey businesses and families, even those of modest wealth. The elimination of the estate tax will allow New Jersey residents to focus on what is best for their business and family as opposed to potential estate taxes. 

Although the estate tax will be eliminated, New Jersey residents should not ignore estate planning altogether. In fact, clients should have their estate planning documents reviewed, as many attorneys specifically prepared wills for New Jersey residents to take into account the New Jersey estate tax. An up to date will along with other essential documents such as a health care proxy, living will and power of attorney are still extremely important for all New Jersey residents. They’ll allow you to manage who receives your assets at death, appoint guardians for minor children, protect your heirs from creditors or divorcing spouses, plan for incapacity, etc. Without proper planning, the death of an owner can be devastating to a family business. Even in light of the Estate Tax repeal, taxpayers should continue to plan to ensure that their wishes are carried out. 

In her role as a Tax Director in the Estate, Gift and Trust Services group, Ruth Raftery is involved in all aspects of estate, gift and trust taxation for individuals and families. You may reach Ruth at rraftery@wiss.com or 646.677.3146.  

Comments (0)

no comments posted

Leave a comment

* denotes required field
* Email will not be published
* Used to help prevent spam

Text only, html will be removed from comment