There are many nuances to the tax laws in different states as they apply to inheritances. Before we look at the inheritance tax question per se, we will share some information about the federal transfer taxes, and then we will drill down.
Federal Gift and Estate Tax
On the federal level, there is an estate tax that most people do not pay, because it carries a $13.61 million exclusion. The only portion of an estate that would be subject to this tax is the portion that exceeds this figure. Every year there are inflation adjustments, so next year the number will be a bit higher.
You cannot give very large gifts to avoid the estate tax, because there is a gift tax. The two taxes are unified, so the exclusion is a unified exclusion. It encompasses lifetime gift giving along with the estate that will be transferred after you are gone.
There are no taxes on transfers between spouses because there is an unlimited marital deduction. One caveat is the fact that the people involved must be American citizens. In addition, the estate tax exclusion is portable. In this context, “portability” describes a surviving spouse’s ability to use their deceased spouse’s exclusion.
State-Level Estate Taxes
There are a number of states in the union that have state-level estate taxes. The exclusions in these states are usually lower than the federal exclusion. As a result, an individual could be exposed on the state level even if their assets did not exceed the amount of the federal exclusion.
Fortunately, there is no state-level estate tax in New Jersey. However, if you own valuable property in a state with an estate tax, the tax in that state would be applicable. For example, if you own a luxury apartment in New York, which is a state with an estate tax, it could come into play.
NJ Inheritance Tax
An inheritance tax and an estate tax are two different things. As we have stated, an estate tax would be applied on the entire taxable value of an estate before it is transferred to all of the heirs.
The dynamic is different with an inheritance tax. This type of tax can be levied on distributions to multiple different heirs when the same estate is being administered.
There is no federal inheritance tax, and there are only five states with state-level inheritance taxes. As luck would have it, New Jersey is one of them.
That’s the bad news, but there is also some good news. Close relatives are exempt from the state level inheritance tax.
Tax Efficiency Strategies
If taxation is going to affect your estate in any way, you are not completely without recourse. There are things that you can do to mitigate the damage, even if you are a high net worth individual with federal estate tax exposure.
You should certainly discuss your situation with us if you are in this position, because there is a lot at stake. It is also worthwhile to note that the federal exclusion is going down to the 2017 level of $5.49 million indexed for inflation at the beginning of 2026.
As a result, you could be in the clear now and your estate could be taxable a couple of years from now.
Attend a Free Seminar
We are holding a series of seminars over the coming weeks and months, and you can really build on your knowledge if you attend one of these sessions. There is no charge, so this is a great opportunity to make an initial connection.
You can visit our seminar schedule page to see the dates, and when you identify the session that works for you, follow the simple instructions to reserve your spot.
Need Help Now?
Our doors are open if you are ready to engage a Warren, New Jersey estate planning lawyer to help you put a plan in place. You can send us a message to request a consultation appointment, we can be reached by phone at 908-222-8803.
- Can I Write My Own Will, or Do I Need an Attorney? - August 15, 2026
- Is There Any Way to Change an Irrevocable Trust? - August 8, 2026
- How Do You Keep Your Estate Plan Flexible? - August 1, 2026
