Despite the fact that the federal government has rolled out a generous federal estate tax law, certain states still levy estate taxes on amounts much lower than the federal threshold. As a recent article explains, New Jersey is one of those states. (In the article states with an “estate tax” are one color, and those with an “inheritance tax” are another color…and New Jersey is plaid!)
The state of New Jersey charges estate taxes for its residents who die with estates worth over $675,000. This is significantly less than the current federal exemption amount of $5.25 million. For wealthy New Jersey residents who have an estate valued above the threshold, the top tax rate can go as high as 16 percent.
Additionally, New Jersey is one of only two states that charges a state inheritance tax, as well as the state estate tax. There is no exemption for New Jersey inheritance tax, which means that assets left to a niece or nephew will get taxed at “dollar one”.
You can plan around the inheritance tax, but you must do so before you die…especially since you won’t be available to plan after you die.