Being aware of the tax burden that your heirs may face after you pass away is very important when you are making preparations for the inevitable. Some states impose more of a burden than others, and here in New Jersey we are in rarefied company. Only the Garden State and the state of Maryland have both an estate and an inheritance tax at the state level.
Before you even get started evaluating your New Jersey tax responsibility you have to be aware of the federal estate tax that is imposed everywhere. Right now the maximum rate of this tax is 35%, and the exclusion amount is $5.12 million. (It should be noted that these parameters are scheduled to change to a $1 million exclusion and a 55% top rate at the end of this year.)
The difference between an inheritance tax and an estate tax is that the estate tax is imposed on the entirety of your assets before they are passed along to your heirs. Once your heirs start receive their portion of the remainder, each one of them must pay the inheritance tax as well.
In New Jersey the exemption amount for the state estate tax is $675,000; there is no inheritance tax exemption except a relatively small one for siblings. However, it should be noted that spouses, children, grandchildren, parents, grandparents and stepchildren are completely exempt from this levy.
This is a lot of taxation to contend with, but there are steps that you can take to reduce your exposure. To explore them in detail, take a moment to arrange for a consultation with a licensed and experienced Central New Jersey estate planning lawyer.