At the end of 2016, New Jersey lawmakers passed a bill that would raise the state estate tax exemption by a hefty amount. The exemption prior to Jan. 2, 2018 is only $675,000. While over half a million dollars sounds like a lot to most families, when you add in the value of homes, retirement investments and other assets, it's easier to hit that total than you might think. In 2014, over 3,000 estate tax returns were filed, for example.
Starting in 2018, the state estate tax exemption rises to $2 million, which will reduce the likelihood that most families will need to pay state estate taxes. That means that you can leave up to that amount to your heirs without any estate tax levy hitting. In cases where assets are being left to spouses, New Jersey never levies a tax, so you don't have to worry about going over that amount in such cases.
The problem is that estate tax isn't the only tax New Jersey aims at estates changing hands. The state also has an inheritance tax, which comes with a much lower exemption. If you're not a spouse or child of the deceased and you inherit more than $500 from the estate, then you end up having to pay some tax on your inheritance.
That exemption amount isn't changing in 2018, and $500 isn't really that much money. Inherit a single automobile, a fancy family heirloom or a piece of art, and you could easily exceed $500 in value.
If you're planning your estate in New Jersey or you might be likely to inherit something soon, it's a good idea to understand the tax ramifications. Working with an estate lawyer can help you protect yourself and your heirs from tax burdens via strong planning and tools such as trusts.