NJ Inheritance Taxes: Remember to File Them

It still holds true today that death and taxes are the only certainties in life.

In the past, New Jersey had two types of death taxes: estate and inheritance. The estate tax was removed on January 1, 2018, leaving New Jerseyans to deal with the lesser-known inheritance tax. Depending on the relationship between a decedent and the beneficiaries, inheritance taxes are assessed when someone dies.

Furthermore, the type of asset being dispersed may impact the tax liability.

To learn more about the New Jersey inheritance tax or any other estate planning or administration matter, consult an experienced Cherry Hill NJ elder law attorney.

Beneficiaries in New Jersey are divided into “classes.”

Depending on a beneficiary’s classification, an inheritance tax bill is owed on an asset transferred to that beneficiary. The following are the categories of beneficiaries:

Class A

This group includes any surviving spouse, civil union partner, or domestic partner, decedent’s parent or parent’s grandparent, decedent’s child or children, decedent’s stepchildren and any adopted children or children. Any assets distributed to Class A beneficiaries are not subject to inheritance tax.

Class C

The decedent’s brother, sister, and son or daughter-in-law fall into this category. All Class C beneficiaries are exempt from inheritance taxes on the first $25,000 of an estate’s assets. When a distribution to a Class C beneficiary exceeds $25,000, inheritance tax is calculated as follows:

  • 11% on amounts over $25,000 and up to $1,100,000;
  • The tax is 13% on amounts exceeding $1,100,000 and less than $1,400,000;
  • A 14%tax applies to amounts over $1,400,000 but less than $1,700,000;
  • Any sum over $1,700,000 attracts a 16% surcharge.

Class D 

Any additional recipients not otherwise classified are included in Class D. These beneficiaries might include partners, stepgrandchildren, cousins, nieces, nephews, and friends. Distributions made to a Class D beneficiary are taxed as follows:

  • A 15% tax is charged on amounts up to $700,000;
  • Over $700,000, the tax rate is 16%

Class E

A tax-exempt charity or government body can receive any amount from an estate without owing inheritance tax.

The type of beneficiary may determine whether certain assets are exempt from inheritance tax.

Inheritance tax due under New Jersey law must be filed by the decedent’s estate within eight months of the decedent’s death and paid to the state.