Most estate plans begin with a common premise: protect what you own and preserve your assets for the people you care about the most without taxes taking an unnecessary share. Many people in New Jersey know about estate taxes, but a common question that comes up during estate planning conversations is, Does New Jersey have an inheritance tax? The simple answer is yes, and whether you owe it depends primarily on your relationship to the person who died and the value of your inheritance.
Willis Law Group focuses exclusively on estate planning and elder law for New Jersey clients. Founding attorney Michael Willis has more than 25 years of legal experience, including work as a prosecutor and trial attorney. We use personalized initial meetings and organized planning processes to identify your needs and develop appropriate solutions. The same paralegal also works with you from intake through completion of your matter, providing continuity as we help you address the New Jersey inheritance tax and other estate-planning concerns.
What Is the Inheritance Tax in New Jersey?
The New Jersey inheritance tax is a tax on property that passes to certain beneficiaries after a person’s death. If the person who died was a New Jersey resident, the tax may apply to real estate and personal property that the person owned, depending on who receives it.
If the person who died lived outside New Jersey but owned real estate or had tangible personal property, such as vehicles, furniture, or jewelry, located in the state, the tax may apply as well. New Jersey generally does not impose its inheritance tax on a nonresident’s intangible property, such as stocks or bank accounts.
How Is New Jersey’s Inheritance Tax Different from Estate Tax?
Inheritance tax and estate tax differ primarily in what they tax. An inheritance tax applies to specific property passing to a beneficiary, while estate taxes apply to the estate based on its taxable value. Although New Jersey eliminated its state-level estate tax in 2018, the federal estate and gift tax may still apply to New Jersey residents with estates above the exemption amount.
Who Has to Pay New Jersey Inheritance Tax?
New Jersey uses beneficiary classes to determine whether a beneficiary is exempt from inheritance tax and, if not, which rates apply. The current system uses Classes A, C, D, and E. Class B was eliminated in 1963.
The four active classes are:
- Class A, exempt from inheritance tax—spouses, civil union partners, qualifying domestic partners, parents, grandparents, children, grandchildren, and other direct descendants, stepchildren, and mutually acknowledged children;
- Class C, $25,000 exemption before tax applies—siblings and the spouse of a child of the person who died;
- Class D, non-exempt from tax—anyone who does not qualify for Classes A, C, or E, such as nieces, nephews, cousins, friends, step-grandchildren, and unmarried partners; and
- Class E, exempt from inheritance tax—qualifying charities, religious organizations, educational and medical institutions, certain nonprofit organizations, New Jersey, and its political subdivisions.
Your relationship to the person who died determines whether you owe New Jersey inheritance tax.
What Are the New Jersey Inheritance Tax Rates?
If you are a Class A or Class E beneficiary, you do not pay the inheritance tax. For those classes that do owe taxes, New Jersey inheritance tax rates begin at 11% and increase to 16% for larger amounts.
Each Class C beneficiary receives a $25,000 exemption, and New Jersey applies graduated rates to the remaining inheritance. The 16% rate kicks in when you receive over $1.7 million. New Jersey generally taxes the first $700,000 received by a Class D beneficiary at 15% and any amount above $700,000 at 16%.
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How Do You Pay New Jersey Inheritance Tax?
If the New Jersey inheritance tax applies, the estate generally must calculate the taxable inheritance, file an inheritance tax return, and pay the amount due. The person responsible for administering the estate generally handles:
- Identifying the beneficiaries and their tax classes,
- Identifying and valuing the property being transferred,
- Calculating the tax, and
- Filing the return and paying the tax.
Paying inheritance tax can be necessary before you can fully transfer some property. New Jersey places a lien on a person’s property at death to secure any inheritance tax that may be due. In practical terms, that means a bank, financial institution, or other party may need proof that the state will allow the transfer of the asset before releasing it.
That permission is called a tax waiver. Depending on the property and the beneficiaries involved, the New Jersey Division of Taxation may issue a waiver after the estate satisfies the applicable inheritance tax requirements. New Jersey also provides procedures that allow certain exempt transfers to proceed without waiting for a standard waiver.
How Can an Elder Law Attorney Help with New Jersey Inheritance Tax?
Your elder law attorney can help you address inheritance tax as one part of your larger estate plan. Before a death, we can review your assets and intended beneficiaries, identify potential inheritance tax exposure, and consider whether appropriate planning can reduce that burden while still carrying out your wishes.
When you cannot avoid inheritance tax, your attorney can help you account for the obligation. We can help you consider how your beneficiary will cover the tax while coordinating your estate planning documents and beneficiary designations with your larger goals.
An elder lawyer can also help you if you are trying to understand your tax obligations after a loved one dies. We can:
- Determine which beneficiary classes apply,
- Identify filing and payment requirements,
- Address necessary tax waivers, and
- Coordinate inheritance tax matters with the rest of the estate administration process.
Considering these issues together allows you to plan for the actual transfer of your property rather than treating inheritance tax as an isolated calculation.
Address New Jersey Inheritance Tax with Willis Law Group
Addressing the inheritance tax in New Jersey is one part of planning for what will happen to your property when you die. Your beneficiaries, assets, tax obligations, and estate planning documents all work together to determine how your plan will operate.
Willis Law Group can help you create documents and coordinate plans to transfer your wealth efficiently upon your passing. Contact us to discuss how the inheritance tax could affect you.
Legal References Used to Inform This Page
To ensure the accuracy and clarity of this page, we referenced official legal and other resources during the content development process:
- Internal Revenue Service, Estate and gift taxes.
- New Jersey Division of Taxation, Inheritance and Estate Tax.
