NOTE: State laws change frequently and the following information may not reflect recent changes in the laws. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.
In addition to a state inheritance tax, New Jersey also imposes a separate state estate tax which has been decoupled from the federal estate tax laws. Here is a summary of the current New Jersey estate tax laws.
When is a New Jersey Estate Tax Return Required to be Filed?
A New Jersey estate tax return, Form IT-Estate, must be filed if the decedent's gross estate plus adjusted taxable gifts exceeds $675,000.
How is the New Jersey Estate Tax Calculated?
The New Jersey estate tax is either the maximum credit for state inheritance, estate, succession or legacy taxes allowable under the provisions of the Internal Revenue Code in effect on December 31, 2001 (this is called the "Form 706 Method"), or an amount determined pursuant to the Simplified Tax System prescribed by the Director, Division of Taxation (this is called the "Simplified Form Method").
The Form 706 Method must be used if the taxpayer is required to file a federal estate tax return, IRS Form 706.
If the taxpayer isn't required to file IRS Form 706, then, in addition to the Form 706 Method, the Simplified Form Method may be used provided that it produces a tax liability similar to the Form 706 Method.
When is the New Jersey Estate Tax Return and Any Payment Required Due?
Form IT-Estate must be filed and any tax due must be paid within nine months of the decedent's death, or nine months plus 30 days if the Form 706 Method is used.
An extension of time to file Form IT-Estate may be requested, however, even if an extension is granted it won't delay the time for payment of any tax due.
The Form 706 Method requires that Form IT-Estate be prepared and filed along with a 2001 IRS Form 706. This is in addition to IRS Form 706 for the year of the decedent's death if one is required to be filed.
Where is the New Jersey Estate Tax Return Filed?
Mail the New Jersey estate tax return, Form IT-Estate, and all other required forms to:
NJ Inheritance Tax and Estate Tax
P.O. Box 249
Trenton, New Jersey 08695-0249
What is the New Jersey Estate Tax Rate?
The tax rate is a progressive rate that maxes out at 16% for the amount above $10,040,000.
Are Transfers to a Surviving Spouse Taxable?
Outright transfers to a surviving spouse are not taxable.
For married couples who have used AB Trust planning to reduce their federal estate tax bill, a New Jersey estate tax may be due on the B Trust after the first spouse's death if there is a gap between the New Jersey estate tax exemption and the federal estate tax exemption at the time the federal estate tax comes back into effect. A married decedent's estate is authorized to make an election on Form IT-Estate to treat property as marital deduction qualified terminable interest property ("QTIP") for New Jersey purposes, but married New Jersey couples cannot defer payment of both New Jersey estate taxes and federal estate taxes until after the death of the surviving spouse using an ABC Trust scheme.
Are Transfers to a Surviving Domestic Partner Taxable?
Federal estate tax laws do not have a provision providing a deduction for property passing to a domestic partner. However, if a New Jersey decedent was a partner in a civil union and died on or after February 19, 2007, and was survived by his or her partner, then a marital deduction equal to that permitted to a surviving spouse under the provisions of the Internal Revenue Code in effect on December 31, 2001, is permitted for New Jersey estate tax purposes.
Does New Jersey Impose a Lien on the Deceased Person's Property?
For New Jersey decedents dying after December 31, 2001, the New Jersey estate tax remains a lien on all property of the decedent as of the date of death until paid. No property may be transferred without the written consent of the Director of the Division of Taxation.
Where Can I Find Additional Information About New Jersey Estate Taxes?
For more information about New Jersey estate taxes, refer to New Jersey Inheritance and Estate Tax General Information on the New Jersey Division of Taxation website.