A Primer on the New Jersey Estate Tax

There have been a number of New Jersey legislators recently advocating for the repeal of the New Jersey Estate Tax or an increase in the applicable exclusion amount. The text of bill A120 clearly states the basis for the attack – “this archaically low threshold for New Jersey’s estate tax—less than the value of many middle-class homes—encourages small businesses and their owners to shut down and leave the State.”

Historically, the New Jersey estate tax was a “pickup” tax designed to absorb any credit for state death tax available in a decedent’s federal estate tax proceeding. The New Jersey estate tax is now imposed upon the transfer of the estate of every New Jersey resident decedent which would have been subject to a Federal estate tax under the provisions of the Internal Revenue Code in effect on December 31, 2001.

A New Jersey Estate Tax return must be filed if the decedent’s gross estate plus adjusted taxable gifts exceeds $675,000. Any estate tax due must be paid within 9 months of the decedent’s death.

Qualifying distributions to spouses are exempt from the New Jersey Estate Tax due to the unlimited marital deduction. Distributions to charities are also exempt. A New Jersey Estate Tax may be assessed on inheritances by beneficiaries including parents, children and other lineal descendants. Although such beneficiaries are exempt from the New Jersey Inheritance Tax, bequests or transfers to such beneficiaries in excess of the $675,000 exclusion amount are taxable.

The New Jersey Estate Tax is calculated as follows:
Table21