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Varying tax rates for New Jersey estates

On Behalf of | Feb 1, 2022 | Estate Planning & Probate |

New Jersey repealed its estate tax in 2017 but has retained its inheritance tax. This tax varies from 0% to 16% with rates that increase when the number of inheritances increases. The government decides a specific tax rate for every beneficiary.

Who receives the inheritance?

The inheritance tax in New Jersey is paid by the inheritors of an estate consisting of real, tangible or intangible property. The portion of the inheritance that the inheritors, also known as beneficiaries, receive depends on the relationship to the decedent.

Class A are the first recipients including the spouse and children, and the Class C recipients are close family members, such as the siblings and parents. Class E beneficiaries include government agencies, charities and nonprofit organizations. Any other type of beneficiary is classified as Class D.

Estate tax rates

Class A or E inheritors do not pay any tax. Class C inheritors pay a variable tax rate that is 11% for an inheritance of $1,075,000 that is above the $25,000 exemption. They pay 13-16% on certain amounts above $300,000 and $1.7 million. For inheritances over $500, class D inheritors pay 15% tax for the first $700,000 and 16% for an amount over $700,000. During probate, the court decides how much inheritance tax is due if beneficiaries belong to different classes. The amount of inheritance that each person receives will affect the amount of tax.

Review the current tax rates

The inheritance tax is the last tax that you must pay upon your death. It’s important to keep in mind that tax legislation changes often and can affect the rates that you and your beneficiaries pay for inheritance taxes.