In a recent post, we discussed the unique challenges that New Jersey residents face when it comes to estate and inheritance taxes. This state is just one of two that requires both state estate taxes and inheritance taxes to be paid upon a person's death. Our earlier post on that subject can be found here.
There is no doubt that taxes are an important consideration when someone develops an estate plan in New Jersey. Some people will go to great lengths to avoid these high taxes by moving to a different state. However, this has created some serious economic challenges, as income coming into the state is only about half the amount that is leaving. In order to address this troubling issue, a bill was recently proposed to significantly decrease estate tax obligations in this state.
The legislation was proposed by Assemblyman Ron Dancer and it tackles both the state estate taxes and inheritance taxes in New Jersey.
Not only would the bill remove the inheritance tax requirement, but it would also increase the state estate tax threshold to meet the level set by the federal government. This would mean that unless an estate is valued at $5.1 million or more, additional state estate taxes would not need to be paid. In regards to the inheritance tax, the proposed bill would repeal the obligation to pay taxes on the transfer of property and tangible assets to people other than spouses, for whom there is already an exemption in place.
Whether the bill will pass or not remains to be seen. However, many supporters say that easing the tax burdens on estates in New Jersey is a crucial step in retaining and attracting residents to this state.
Either way, residents should remember that estates of any size can be subject to various taxes. It is important for people to understand what taxes may be required and how much it could cost. In some cases, there are ways to minimize or avoid certain taxes, which could come as a great relief to the people who will ultimately receive or manage assets distributed in an estate plan.
Source: PolitickerNJ, "You Can't Take it With You, but Dancer Bill Would Help You Leave More to Your Children," April 7, 2014