Estate Liquidation Tax Exemption in NJ & What to Expect

Estate Liquidation Tax Exemption in NJ

Estate Liquidation / February 1, 2022

Inheritance tax is the levy imposed with some inheritances. According to the newest 2022 information, there are only six states where inheritance tax is charged; New Jersey is one. Whether or not you get subjected to these federal estate taxes and how much the tax rates will be depends on your relationship to the deceased and the amount of money or assets inherited. There are different classes in which a named beneficiary might fall depending on their relation to the deceased person.

Class A, C, D, E Inheritance Taxes

Certain recipients will be taxed more depending on their relationship with the decedent. For example, spouses are an example of class A beneficiaries, whereas siblings will be class C beneficiaries. These classes can be summed up as follows:

Class A inheritance tax

Beneficiaries in this class are exempt from inheritance tax. As previously mentioned, this class includes the decedent’s spouse, but it also encompasses civil union partners, children, legally adopted children, grandchildren, great-grandchildren, parents, grandchildren, and step-children (or mutually accepted children).

Class C inheritance tax

It is within this class that inheritance tax starts getting imposed. For this class, there is no tax on the first $25,000, and after that, 11% percent will be charged on the next 1.075 million, 13% on the next $300 000, and 14% on the next %300 000. The rate for anything over $1.7 million will be 16%.  This class includes beneficiaries like the decedent’s siblings, sons- and daughters-in-law (and civil union partners of children.)

Class D inheritance tax

For class D recipients, there is a 15% tax on the first $700 000 and 16% on any amount over that. This class includes all other family members, such as nieces, nephews, and friends.

Class E inheritance tax

As with Class A, this class is exempt from inheritance tax. This class includes qualified charities, religious, educational, medical institutions, and non-profit and scientific institutions. This also includes the State of New Jersey and its political subdivisions.

It’s not easy to dodge New Jersey inheritance tax, but there are ways to reduce it and even avoid it entirely. But it isn’t going to happen on its own. You’ll need to use a variety of estate planning tactics to be proactive even before the decedent’s death.  This information is applicable at the time of this post in 2022, but we do encourage you to check with your local tax codes and research the most up-to-date tax laws, as things change frequently.

Contact Jerry, your estate tag sales expert, for further information.