Death Tax Increase in New Jersey

On July 1, 2002, New Jersey increased the New Jersey estate tax.  New Jersey had always had an inheritance tax with many exceptions.  There was no inheritance tax on a bequest to a spouse, no inheritance tax to children, no inheritance tax on life insurance with a named beneficiary and, of course, no tax to a charitable beneficiary.  However, in any estate in which there was a federal estate tax payable, New Jersey insisted that the taxpayers take full advantage of the credit for State death taxes which was subtracted from the actual tax paid to the Federal Government and the amount that didn’t go to the Federal Government would then go to the State.  Thus, with reforms and reduction of federal taxes, the credit for State death taxes was melting and the State not realizing that revenue.  Have you ever heard of a government seeing a tax it didn’t like?   The New Jersey estate tax, heretofore taken as a credit against the federal tax, has been fixed or repaired.  We now face an “even if” situation.  Even if there is no federal estate tax, New Jersey will collect an estate tax.  Be on the alert.  The tax is construed so that there may be no federal tax and yet a New Jersey estate tax may be due, not just an inheritance tax.

An inheritance tax is a tax on what a beneficiary received and the beneficiary is charged for it.  An estate tax is payable by the estate and it is on the amount of the estate.  Of course, any amount passing to a spouse is totally free from tax.

© 2017 by Kearns Duffy & Vaccaro, P.C.

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