On Friday, October 7, 2016, of this week legislators in Trenton repealed the estate tax, along with a 23 cent increase to the gasoline tax, allowed a couple to exclude up to $100,000 of retirement income from taxable income, and cut sales tax from 7% to 6.625% over the next two years. It is important to note that the repeal only applies to the estate tax and not the inheritance tax. The estate tax broadly applied to all people that could receive property or other wealth from your estate. The inheritance tax on the other hand applies to people inheriting from you such as brothers/sisters, uncles/aunts, and nieces/nephews, all people that are not direct descendants or ancestors.
How the Repeal Will Work
The New Jersey estate tax has been applicable for estates above $675,000 before the passage of this bill. After Friday's vote and pending approval by Governor Christie, the estate tax will apply to estates over $2 million for people dying after January 1, 2017, but before January 1, 2018. A complete repeal will go into effect on January 1, 2018, so residents dying after this date will not be subject to estate tax. In effect, there will be no estate tax due on transfer of your property or wealth, however the inheritance tax may apply.
What This Means For You
When the bill is signed into law New Jersey residents will no longer have to plan for the $675,000 estate tax limit, but will still have to be wary of the federal estate tax limits (depending on the results of November's election) and of course the New Jersey state inheritance tax. No matter the size of an estate, it remains important to work with an attorney focused on estate planning to plan for a number of non-tax reasons, including ease of management of assets while alive if you experience a disability; protection against creditors/lawsuits; divorcing spouses of children/beneficiaries; and ease of administration upon death.