We are counting down to Estate Tax Relief. Earlier this year, governor signed into law the New Jersey estate tax repeal, thus ending NJ’s dubious distinction as the “worst state to die in” form a tax perspective (This honor now goes to Maryland). Starting on January 1, 2017, NJ’s estate tax will not kick in unless an estate is more than $2 million. And starting January 1, 2018, the NJ estate tax is repealed altogether. This means that, after January 1, 2018, no matter how large the estate is, NJ will not impose an estate tax. (Keep in mind that in 2017, the IRS will impose a federal estate tax on any estate worth more than $5.49 million).
But wait, don’t think you are getting off entirely. New Jersey is keeping its inheritance tax. This is a tax that is imposed on the beneficiary of an estate, although the estate can also pay the tax, if there is a will in place that authorizes that payment. Close relatives do get relief as well. Bequests to parents, grandparents, children and grandchildren are wholly exempt from inheritance tax. Bequests to siblings and daughter-in-laws and son-in-laws are exempt only for the first $25,000; after that the inheritance tax ranges from 11% to 16%. Bequests to any other category of persons are taxed at 15% to 16%. As always, gifts to charities are 100% exempt from inheritance tax.
Even with the repeal of the Estate Tax, having an updated Will, Power of Attorney and Medical Power of Attorney are still very important. These documents allow you to define your desires and wishes regarding your end of life care and disposition of your assets. If you have questions about your estate plan or need to update your Will, please contact Melanie Levan.