New Jersey Estate Taxes May See Reform

New Jersey estate taxes may see cuts in the upcoming year. Currently, the Garden State is 1 of 2 states that taxes both the estate of the deceased and also its heirs.

At a time when many states have been cutting their estate tax, New Jersey estate taxes may also see . Currently, the Garden State is 1 of 2 states that taxes both the estate of the deceased and also its heirs.As a result of this policy of double taxation, New Jersey’s tax treatment of those who pass away has generated substantial visibility, according to NJ.com.

New Jersey Estate tax policy

While New Jersey levies both an estate tax and an inheritance task, its estate tax exclusion is also the least of any state in the U.S. at $675,000. This figure compares to the federal exemption, which rose to $5.43 million in 2015.

In addition, New Jersey counts real estate, cash, life insurance benefits, retirement accounts and other assets when determining the value of one’s estate, according to The Asbury Park Press NJ.

The inheritance tax applies to any transfers to the decedent’s siblings – or their children’s spouses – that are worth $25,000 or more, the media outlet reported. In addition, the levy, which has a rate between 11 and 16 percent, applies to any transfers of $500 or more to friends or other relatives.

Taxpayer challenges

Industry participants and policy analysts have brought up multiple challenges that stem from New Jersey’s current treatment of its residents’ estates. Currently, the Garden State’s low estate tax exclusion results in the jurisdiction exempting the lowest number of taxpayers from facing this burden, according to The Asbury Park Press NJ.

Because the exemption is so low, many consider the estate tax an afterthought and are surprised when they have to pay it, Tedd Vitale, a certified public accountant in Spring Lake Heights, told the news source.

Those who oppose the current estate tax policy emphasize that because the state’s average home value is $296,000, having one’s estate reach a value of $675,000 is not a difficult task, according to NJ.com. Gov. Chris Christie emphasized how this policy affects middle-class families.

“For people who own a house in New Jersey, if they just own their house free and clear and have a little bit of retirement income leftover – and remember what happens here, once you get to $675,000 and $1, the tax isn’t on the $1. It’s on the $675,” Christie said. “This affects most middle class families in New Jersey who own their own home.”

Proposed reform

Amid this situation, lawmakers have floated several different proposals that would change how the state treats estate taxes, according to The Asbury Park Press NJ. One state lawmaker who supports the change is state Sen. Steven Oroho, (R-Sussex, Warren, Morris), a certified financial planner.

“It actually chases income out of the state of New Jersey,” Oroho told the news source. “Quite frankly, people know right away, financial planners and estate attorneys, they almost feel like they have a duty to tell their clients: Here’s what it costs in New Jersey, and here’s what it costs elsewhere.”

Tradeoffs

As New Jersey state lawmakers consider where they will get the money to pay for any change in estate tax policy, many are considering hiking the gas tax, according to NJ.com. Currently, the Garden State has the second-lowest gasoline tax in the nation, totalling 14.5 cents per gallon.

Lawmakers on both sides of the political spectrum will have to work together if they want to hike the gasoline tax, State Assembly Speaker Vincent Prieto (D-Hudson) told the news source.

If New Jersey officials do find a way to change estate tax policy, such a move could have a major impact on residents of the Gardent State, as many are moving to other states to retire because “they simply can’t afford to die here,” Assemblyman Anthony Bucco (R-Morris) told the media outlet.

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Frank Brunetti has been practicing law for over thirty years in the areas of estate and wealth preservation, tax planning for business entities and complex tax matters. He is admitted to the New Jersey and New York Bars as well as the United States Tax Court. Mr. Brunetti provides representation in federal and state tax matters, IRS controversies, estate and business planning and guidance for the preparation of wills and trusts as well as the administration of estates. For more information, please visit Frank Brunetti's full biography at Scarinci Hollenbeck

One Response to “New Jersey Estate Taxes May See Reform”

  1. For what it’s worth – I’m 78 and my wife is 77. We have 7 children, 26 grand children and a great grandchild on the way. Our estate today would be well below the federal estate tax amount, but enough that we would take a good wallop in New Jersey. We spent most of our lives in New Jersey and likely would have stayed for the duration were it not for the state’s confiscatory death tax. The income taxes, and the property taxes are bad enough but add in the death tax and we simply could not justify staying (much as we didn’t want the hassle of moving or to part with the home we lived in for nearly 40 years). So after considering our options, we moved to the Tampa Bay area two years ago, along with my business so that now, when the time comes, we will not pay one red cent in estate taxes. Stated another way, New Jersey will now not only miss out on gouging our estate, but it will also not get any further income tax or capital gains taxes from us in our remaining years (both of us are in reasonably good health so God willing that could be another 20 years). Knowing all that, and knowing that what I have spent my life building will go to supporting my family (college tuitions, first home down payments, etc) rather than towards generous pensions for strangers who retire at 55 easily outweighs the trouble and pain of having to leave our old home. Oh and last but not least, I should add that one of our daughters so far has gotten a transfer and moved down to this area now as well so there will be no further property or income taxes forthcoming from her either.

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