Inheritance Tax

Author: Wolfe Ossa LawCategories: Elder Law, Estate, Probate Law, Wills

Inheritance Tax

Inheritance tax is exactly what it sounds like: tax paid on your inheritance. Depending on what your relationship is to the decedent, you could owe the State taxes. This is different from Estate Tax, which New Jersey recently did away with. You can read all about that here. We’ll talk a little more about that later on.

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! Woohoo!! 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 would be exempt. The full chart can be found here 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 Estate Administration.

Estate Tax

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. But starting January 1, 2018 the State of New Jersey is no longer collecting estate taxes. And so moving forward, this is not something you will need to worry about.

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