Estate and inheritance taxes can be complex. Understanding which tax the state imposes is essential for proper estate planning and for beneficiaries receiving assets after a loved one’s passing. Continue reading and work with a skilled Sussex County estate lawyer today.
What is an Estate Tax?
An estate tax is a tax imposed by a government on the total value of a person’s assets at the time of death before the assets are distributed to their legal heirs or beneficiaries. It is not a tax on the inheritance received by the beneficiary, but rather a tax on the decedent’s right to transfer the property. The value of the taxable estate is calculated after subtracting allowable deductions, such as debts, administration expenses, and transfers to a surviving spouse or qualified charities. The remaining estate is taxable.
The United States federal government currently imposes an estate tax. This tax is applied only to estates valued above a very high exemption amount, which is subject to change by Congress and is indexed for inflation. Because of this high exemption threshold, the federal estate tax affects only a small percentage of the wealthiest estates nationwide. In 2026, the basic exclusion amount is $15,000,000. Some states impose an estate tax as well.
Does New Jersey Have an Estate Tax?
No, New Jersey does not currently impose a state-level estate tax. Historically, New Jersey was one of the few states that had both an estate tax and an inheritance tax. However, the New Jersey Estate Tax was officially repealed for decedents dying on or after January 1, 2018. This change was a significant move, simplifying the tax landscape for New Jersey residents and those with property in the state. Estates in New Jersey are mainly concerned with the federal estate tax, which only applies to the highest-value estates, and any other relevant state taxes.
What is an Inheritance Tax?
Unlike an estate tax, which is imposed on the decedent’s entire estate, an inheritance tax is a tax imposed on the person who receives the assets, meaning the beneficiary. It is based on the value of the property received and the relationship between the decedent and the beneficiary.
New Jersey is one of only a handful of states that still imposes a state-level inheritance tax. Whether the tax applies, and the specific tax rate, depends entirely on the “class” of the beneficiary, meaning their relationship to the person who died. Exemptions apply to immediate family members.
For more information, reach out to an experienced attorney today.
