Inheritance Tax Explained

Author: Wolfe Ossa lawCategories: Elder Law

What is an inheritance tax?

Inheritance tax is a tax that is paid on your inheritance. Depending on what your relationship is to the decedent, you could owe the State taxes.  Read more here.

How closely related you are to the deceased determines how much you pay in taxes. Inheriting through a direct line (i.e. grandparents, parents, kids) or a spouse, means no inheritance tax!  Siblings, cousins, aunts, uncles, friends, and the like, now that’s a different story. There are varying levels of percentages and varying amounts of money that could be exempt. The full chart can be found on the New Jersey Division of Taxation website.

How these taxes are paid depends on what the Will says. They can be paid from the Estate, in which case the total amount owed would be paid by the Estate and then the money left over would be distributed. Or each person can pay their own taxes. Additionally, the Tax return for the Estate needs to be filed within 8 months of the decedent’s passing. We handle this during the Estate Administration.

Rather than being based on your relation to the decedent, the amount of estate tax owed is calculated based on the gross value of the Estate. If the decedent passed away prior to 2017, then estate tax was due if the estate was valued at more than $675,000. If the decedent passed away during 2017, then estate tax was only due if the estate was worth more than $2,000,000. However, the state of New Jersey is no longer collecting estate taxes.

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