Will You Be Impacted by the New Jersey Death Transfer Tax?

When it comes to high-dollar decisions about estate planning, many people wrongfully believe they are not included because the federal tax exemption of $5.34 million is so high. While this is true, in New Jersey, you should be aware of the transfer tax because far more people are included under that umbrella.

In New Jersey, an estate larger than $675,000 at the time of your death can trigger the New Jersey Transfer Estate Tax. If you think you’re close, but not sure: cars, cash, bonds, life insurance, retirement accounts, real estate, bonds, stocks, and personal items are all included. A fair number of New Jersey residents hit that threshold with just their retirement plan and real estate. Depending on who will be the Beneficiary, there may be a separate inheritance tax of up to 18%. (See out prior blog post: https://lawesq.net/blog/2014/05/the-n-y-state-of-mind-changes-to-new- york-gift-tax-and-estate-laws/) 

Photo Credit: thedailyriff.com

There are a few things worth bringing up if you’re concerned about this tax. First of all, it is possible to plan around it. Using DING or NING trusts, which involve establishing trusts out of state, can be a great tool for addressing state tax concerns. Gifting and special plans for your retirement accounts can also address concerns for the future.

Setting things up in advance through a trust can also make it easier on your loved ones if you have passed away. There are many cases in which a simple will just won’t suffice. To talk specifics for your assets and plans, call us today 732-521-9455.


One of the Biggest Problems of Dying as a Resident of New Jersey

It’s not uncommon for my out-of-state relatives & friends to utter some variation of the phrase “I wouldn’t be caught dead in New Jersey.”  Just Google the state name & you’ll find a ton of clever quips about the Garden State (use “Armpit of America” as your search term and you’ll find search results right on point.)

Having lived here for the past 25 years, I can vouch for the fact that New Jersey is a great state in which to live.  We experience all the seasons throughout the year; you can take a road-trip to visit farms, cities & shores all in the same day.  There is a tremendous diversity of cultures.  Yes, it can be a fantastic place to live.  Dying here, however, is another story.

I shared an article from a Wall Street Journal Blog about a year ago (click here to read the Death Tax Ambush) which highlighted one of the biggest problems of dying as a resident of New Jersey:

“Here’s some free financial advice: Don’t die in New Jersey any time soon. If you have more than $675,000 to your name and you die in the Garden State, about 54% may go to the IRS and the tax collectors in Trenton.”

An article last week in the Wall Street Journal addressed this issue again (click here to read Death Tax Defying.) Ohio has abolished its Estate Tax/Death Tax, making it state #29 to do so.   Unfortunately, New Jersey has not (neither has New York for that matter.)   One of the arguments I hear most often for the repeal of the Estate Tax/Death Tax in New Jersey (and the Federal Estate Tax for that matter) is best summed up in last week’s article:

“The answer is that Americans instinctively understand that the tax is unfair. It punishes a lifetime of thrift and investment solely due to the accident of death. And it does so in a way that imposes another tax on income that in most cases has already been taxed once, or sometimes twice.”

If you happen to find yourself in the Garden State, I hope you reach out to me. Perhaps we can grab a bite at one of the fantastic restaurants in Princeton or New Brunswick, or maybe catch a show at Newark Performing Arts Center.  We can enjoy some delicious Jersey Tomatoes, or I can point you to a spot in Cape May (which can be a great place for a family vacation.)   However, until the legislature acts or you’ve done some planning, just don’t get caught dead here.