Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

A Primer on Estate and Inheritance Tax for New Jersey

Author: Scarinci Hollenbeck, LLC

Date: March 7, 2017

Key Contacts

Back

When someone dies, the people left behind are often stunned and shocked by the taxes they have to pay.

They hear all kinds of scary terms like “estate tax” and “inheritance tax,” and they don’t know what the difference between the two is, or even if there’s a difference at all.

Jersey City real estate tax credits are enticing many developers from all over to come to the city and create new commercial properties.

People fear what will happen if they don’t pay the right amount, and don’t know how to determine what the right amount might be. Explore a primer on the similarities and differences between an estate tax and inheritance tax, and how a New Jersey tax attorney can help you.

Death Taxes: Estate vs. Inheritance

Ever since the most recent changes to the New Jersey inheritance tax and estate tax laws, which occurred as a result of the same bill that raised the gas tax in the state, there has been confusion about the difference between the two. Estate and inheritance taxes are two different taxes, but both fall under the overall umbrella of death taxes.

Federal Tax

The federal government has an estate tax, but no inheritance tax. Currently, this tax rate is at 40 percent, with an exemption of $5.49 million. This tax rate is applied to the taxable portions of the estate that exceed the exemption amount, and tax is reported and paid on the estate tax return of the decedent.

The taxable estate is, in general, based on the current market value of the assets possessed by the decedent on the date of their passing. This total is then reduced by debts, expenses and certain other liabilities as well as deductions like unlimited charitable and marital deductions. The remaining amount after all deductions is then subject to the estate tax to the extent that it exceeds the exemption amount.

New Jersey Estate Tax

The New Jersey estate tax currently exists and works much like the federal tax, but with an exemption of $2 million, for decedents dying after January 1, 2017, and a 16% tax rate. This means an estate tax is only paid on estates worth more than the exemption amount, and the tax is 16% of the portion that exceeds the exemption, minus allowable deductions. It’s important to note that currently the estate tax in the Garden State is scheduled to be repealed at the beginning of 2018. However, with a gubernatorial election between now and then, the scheduled repeal is in doubt.

New Jersey Inheritance Tax

An inheritance tax is based on the beneficiary’s relationship to the decedent as well as the amount received by the beneficiary. The federal government does not impose an inheritance tax, but New Jersey does. Spouses, children, and grandchildren are exempt in New Jersey, but siblings, nieces, and nephews are not. Each category of the beneficiary is subject to its own exemption amount and tax rate.

However, the current books are written in such a way that inheritance and estate taxes offset one another. This means that, in theory, no one should pay more through the combination of taxes than they would normally pay for the greater of the two when calculated separately.

New Jersey Tax Attorney

It’s tricky to understand the death taxes in New Jersey, the classes of beneficiaries, and the tax rates paid based on the different levels of an estate, relationships and the like. If you’re facing the need to close an estate, it can be helpful to talk with a qualified and experienced New Jersey tax attorney.

At Scarinci Hollenbeck, we have years of experience in dealing with these complex issues. Therefore, if you have any questions or if you would like to discuss the matter further, please contact me, Amy Van Fossen, at 201-806-3364.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Dissolving Your Business: Essential Legal Steps to Protect Your Interests post image

Dissolving Your Business: Essential Legal Steps to Protect Your Interests

If you’re considering closing your business, it’s crucial to understand that simply shutting your doors does not end your legal obligations. Unless you formally dissolve your business, it continues to exist in the eyes of the law—leaving you exposed to ongoing liabilities such as taxes, compliance violations, and potential lawsuits. Dissolving a business can seem […]

Author: Christopher D. Warren

Link to post with title - "Dissolving Your Business: Essential Legal Steps to Protect Your Interests"
The Role of Corporate Restructuring in Mergers & Acquisitions post image

The Role of Corporate Restructuring in Mergers & Acquisitions

Contrary to what many people think, corporate restructuring isn’t all doom and gloom. Revamping a company’s organizational structure, corporate hierarchy, or operations procedures can help keep your business competitive. This is particularly true during challenging times. Corporate restructuring plays a critical role in modern business strategy. It helps companies adapt quickly to market changes. Following […]

Author: Dan Brecher

Link to post with title - "The Role of Corporate Restructuring in Mergers & Acquisitions"
Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public post image

Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public

Cryptocurrency intimidates most people. The reason is straightforward. People fear what they do not understand. When confusion sets in, the common reaction is either to ignore the subject entirely or to mistrust it. For years, that is exactly how most of the public and even many in law enforcement treated cryptocurrency. However, such apprehension changed […]

Author: Bryce S. Robins

Link to post with title - "Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public"
Understanding Chattel Paper: A Key Component in Secured Transactions post image

Understanding Chattel Paper: A Key Component in Secured Transactions

Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]

Author: Dan Brecher

Link to post with title - "Understanding Chattel Paper: A Key Component in Secured Transactions"
Crypto Compliance: A Comprehensive Guide post image

Crypto Compliance: A Comprehensive Guide

For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]

Author: Bryce S. Robins

Link to post with title - "Crypto Compliance: A Comprehensive Guide"
Supreme Court and Title VII: Implications for Reverse Discrimination post image

Supreme Court and Title VII: Implications for Reverse Discrimination

Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]

Author: Matthew F. Mimnaugh

Link to post with title - "Supreme Court and Title VII: Implications for Reverse Discrimination"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!