Federal and State Tax Planning

Your estate includes real estate, retirement accounts, and life insurance.

If you have an estate that is over two million dollars, you should go to an attorney or law firm, such as ours, who specializes in estate tax planning.

  1. Federal Estate tax - There is no Federal Estate tax if the beneficiary is your spouse and a US citizen. There will be Estate tax if your estate is more than $5,120,000 and the beneficiary is someone other than your spouse.
  2. Federal Gift Tax - You can gift up to $5,120,000 in your life time without paying Gift tax. You can make gifts of $13,000 per person per year without having to file a gift tax return and without using any of the $1 million dollar exemption. For example, if you have five children and five grandchildren, you can gift up to $130,000 per year.

You should also be aware of the New Jersey state Inheritance Tax, Gift Tax and Estate Tax laws when you are planning to make a will:

  1. New Jersey Inheritance Tax - the tax is based upon the relationship of the beneficiary to the decedent. The following are the Classes of beneficiaries:
    • Class A - father, mother, grandparents, spouse/civil union partner (after 2/19/07), domestic partner (after 7/10/04), child or children of the decedent, adopted child or children of the decedent, issue of any child or legally adopted child of the decedent and step-child of the decedent.
    • Class B - eliminated by statute effective July 1, 1963.
    • Class C - brother or sister of the decedent, including half brother and half sister, spouse/civil union partner (after 2/19/07) or widow(er)/surving civil union partner (after 2/19/07) of a son or daughter of the decedent.
    • Class D - Any other transferree, distributee or beneficiary who is not included in Classes A, C, or E.
    • Class E - The State of New Jersey or any political subdivision thereof, and other various charitable and educational facilities as further described in the Inheritance Tax Resident Return (see www.nj.gov/treasury/taxation/index).

    The tax rates are as follows:

    • Class A transferees are entirely exempt in estates of decedents dying on or after 7/1/1988.
    • Class C transferees in estates of decedents dying on or after 7/1/1988 are:

      First $25,000


      Next $1,075,000


      Next $300,000


      Next $300,000


      Over $1,700,000


    • Class D transferees in estates of decedents dying on or after 3/29/62 are:

      First $700,000


      Over $700,000


  2. NJ Gift Tax limit - Under New Jersey law, if you gift money to someone other than a Class A Beneficiary, such as your spouse, child, or grandchild, New Jersey will look back three years and bring that gift back into your estate and tax it. For example, if you give your niece $13,000 within three years of your death she will have to pay the NJ inheritance tax on the $11,000 gift.
  3. NJ Estate Tax - There is a NJ Estate tax for estates passing to non-spousal beneficiaries in excess of $675,00.