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New Jersey Estate Administration & Litigation: Recent Revisions to New Jersey’s “Death Taxes”

By: Justin M. Smigelsky, Esq.

Last week, as part of the gas-tax calamity, the New Jersey State Legislature finally saw fit to relieve New Jersey residents of its dreaded Estate Tax (not to be confused with the Federal Estate Tax). To understand the significance of this legislation on New Jersey estates, it is important to understand the current New Jersey “Death Taxes” (as they are commonly referred).

As a general overview, an individual’s estate may be subject to New Jersey Transfer Inheritance Tax, New Jersey Estate Tax, and Federal Estate Tax. In addition, estate planning/administration may also have other tax consequences including, but not limited to, income tax. In regards to New Jersey Transfer Inheritance Tax, the imposition of same depends on the “Class” of the beneficiary who receives the assets at death – currently, there is no tax for Class “A” beneficiaries (lineal descendants including father, mother, grandparent, or child) or charities; a rate of 11% to 16% for transfers in excess of $25,000 for Class “C” beneficiaries (brother, sister, or husband/wife or widow/er of son or daughter); and a rate of 15% on any amount up to $700,000, and 16% on any amount in excess of $700,000, for Class “D” beneficiaries (most other beneficiaries). New Jersey also imposes its Estate Tax on estates with a gross value exceeding $675,000 – upon inclusion of the decedent’s real property, tangible and intangible property, insurance proceeds, and financial accounts, this amount is easily surpassed for many New Jersey residents.

It is no surprise why most New Jersey residents with assets often engage in sophisticated – and often expensive – estate planning such as the creation of disclaimer, bypass, credit shelter, or AB trusts. As part of the recent gas-tax legislation, however, a significant change will be implemented to the New Jersey Estate Tax. Effective January 1, 2017, the current exemption amount of $675,000 will be increased significantly to $2,000,000 – a much-less-attainable threshold for most individuals. Additionally, effective January 1, 2018, the dreaded New Jersey Estate Tax is repealed! Although the New Jersey Transfer Inheritance Tax remains in effect, this overlooked portion of the recent legislation will be extremely beneficial to many residents.

In sum, the recent gas tax legislation is not without its silver lining – estate beneficiaries of New Jersey decedents will be offered substantial tax relief, while estate planning in New Jersey may be simplified significantly for most residents as a result of this long-awaited repeal.

Because estate and trust planning, administration, and litigation requires specialized knowledge, you may wish to consult with an experienced attorney if you are either a fiduciary or beneficiary of an estate or trust. Specifically, you may wish to contact an attorney if you have questions regarding your estate planning, the probate process, administration of an estate or trust, fiduciary obligations, preparation of a formal or informal accounting, refunding bonds and releases, and the procedures for filing a formal accounting or exceptions thereto. This article is for information purposes only, and is neither legal advice, tax advice, nor the creation of an attorney client relationship.

Justin M. Smigelsky, Esq. /  Timothy J. Little, P.C.  –  2016  –  All Rights Reserved

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New Jersey Estate Administration & Litigation: Recent Revisions to New Jersey’s “Death Taxes”

New Jersey Estate Administration & Litigation: Recent Revisions to New Jersey’s “Death Taxes”

By: Justin M. Smigelsky, Esq.

Last week, as part of the gas-tax calamity, the New Jersey State Legislature finally saw fit to relieve New Jersey residents of its dreaded Estate Tax (not to be confused with the Federal Estate Tax). To understand the significance of this legislation on New Jersey estates, it is important to understand the current New Jersey “Death Taxes” (as they are commonly referred).

As a general overview, an individual’s estate may be subject to New Jersey Transfer Inheritance Tax, New Jersey Estate Tax, and Federal Estate Tax. In addition, estate planning/administration may also have other tax consequences including, but not limited to, income tax. In regards to New Jersey Transfer Inheritance Tax, the imposition of same depends on the “Class” of the beneficiary who receives the assets at death – currently, there is no tax for Class “A” beneficiaries (lineal descendants including father, mother, grandparent, or child) or charities; a rate of 11% to 16% for transfers in excess of $25,000 for Class “C” beneficiaries (brother, sister, or husband/wife or widow/er of son or daughter); and a rate of 15% on any amount up to $700,000, and 16% on any amount in excess of $700,000, for Class “D” beneficiaries (most other beneficiaries). New Jersey also imposes its Estate Tax on estates with a gross value exceeding $675,000 – upon inclusion of the decedent’s real property, tangible and intangible property, insurance proceeds, and financial accounts, this amount is easily surpassed for many New Jersey residents.

It is no surprise why most New Jersey residents with assets often engage in sophisticated – and often expensive – estate planning such as the creation of disclaimer, bypass, credit shelter, or AB trusts. As part of the recent gas-tax legislation, however, a significant change will be implemented to the New Jersey Estate Tax. Effective January 1, 2017, the current exemption amount of $675,000 will be increased significantly to $2,000,000 – a much-less-attainable threshold for most individuals. Additionally, effective January 1, 2018, the dreaded New Jersey Estate Tax is repealed! Although the New Jersey Transfer Inheritance Tax remains in effect, this overlooked portion of the recent legislation will be extremely beneficial to many residents.

In sum, the recent gas tax legislation is not without its silver lining – estate beneficiaries of New Jersey decedents will be offered substantial tax relief, while estate planning in New Jersey may be simplified significantly for most residents as a result of this long-awaited repeal.

Because estate and trust planning, administration, and litigation requires specialized knowledge, you may wish to consult with an experienced attorney if you are either a fiduciary or beneficiary of an estate or trust. Specifically, you may wish to contact an attorney if you have questions regarding your estate planning, the probate process, administration of an estate or trust, fiduciary obligations, preparation of a formal or informal accounting, refunding bonds and releases, and the procedures for filing a formal accounting or exceptions thereto. This article is for information purposes only, and is neither legal advice, tax advice, nor the creation of an attorney client relationship.

Justin M. Smigelsky, Esq. /  Timothy J. Little, P.C.  –  2016  –  All Rights Reserved

Leave a reply

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