According to a “Quick Facts” report of the United States Census Bureau, the median value of a home in Bergen County, New Jersey for the period ending 2012 was $461,400. This figure is almost 37% higher than the New Jersey state average. Adjusted for inflation, the median value of a Bergen County home will approach $500,000 by 2015. This data confirms that planning for the New Jersey Estate Tax, which is triggered when the value of an estate exceeds $675,000, remains an important consideration for most Bergen County residents.
A major difference between the federal and New Jersey Estate Tax laws is the fact that there is no “portability” feature under the New Jersey Estate Tax law. For married New Jersey residents this means that if you do not use the New Jersey Estate Tax exclusion of the first spouse to die, the exclusion is lost forever.
To illustrate the cost of failing to plan – the New Jersey Estate Tax for a married couple with a $2,000,000 estate that does not use the exclusions available to both spouses is $103,920, payable at the death of the survivor. A Will that uses the exclusions available to both spouses can reduce the New Jersey Estate Tax due at the death of the survivor to $57,040 — realizing a tax savings of $46,880. With additional planning, including a potential change of domicile or using available lifetime gift tax exclusions, this tax can be minimized or avoided entirely.
The New Jersey Estate Tax is subject to progressive rates. The consequences of failing to plan increase dramatically as the value of the estate increases. The highest tax rate applied to a $2,000,000 estate is 7.2%. The top tax rate reaches 16% for an estate valued in excess of $10,040,000.
New Jersey residents should not be lulled into inaction under the false assumption that the need for estate planning arises from the death of the first spouse to die. In fact, it’s never too early to begin estate planning for you and your family. Often waiting until the death of the first spouse to die to begin carries a steep price tag, especially for New Jersey residents.