Overview of the New Jersey Inheritance Tax

Recently, a number of bills have been introduced advocating the repeal of the New Jersey Inheritance Tax, which is a transfer tax imposed when certain transferees receive a gift or bequest. Legislators who advocate for repeal argue that it is unduly burdensome.

Transfers subject to the New Jersey Inheritance Tax include transfers by will or intestacy, inheritance of jointly held property by survivorship, transfers which are intended to take effect upon or after death and transfers made within three years of death with intent to avoid the tax.

The New Jersey Inheritance Tax is calculated after determining the value of property that was received by the beneficiary and the relationship of the beneficiary to the decedent.

Absent a directive in the decedent’s Will, the tax is imposed upon the asset transferred to the beneficiary. A Will can direct that the tax be allocated to, and paid by, the decedent’s estate.

There are viable estate planning techniques which can be implemented to reduce or avoid the New Jersey Inheritance Tax.  Exempt transfers include distributions to the exempt individuals or entities noted above and charities.  Also, real property located outside New Jersey and life insurance proceeds payable to a named beneficiary other than the decedent’s estate, executor, trustee, or administrator are exempt from the tax.