New Jersey Estate Tax for Non-Residents Coming?

New Jersey Estate Tax for Non-Residents

New Jersey State Senator Andrew Ciesla, a Republican from Brick, has introduced legislation to modify the New Jersey estate tax so that non-residents, in addition to residents, are responsible for paying the tax.

Currently, New Jersey has two types of death taxes.

There is the New Jersey estate tax, which generally imposes a tax of 6-12% on all estates over $675,000. The New Jersey estate tax is currently only imposed upon the estates of decedents who are residents of New Jersey.

Additionally, New Jersey has an inheritance tax of 0-16%, depending upon whom assets are transferred. The New Jersey inheritance tax is imposed on the estates of all New Jersey residents as well as non-residents who own real or tangible personal property in New Jersey.

If the assets pass to a spouse, civil union partner, lineal ascendant, lineal descendant or charity, then the transfer is exempt from the inheritance tax.

If the assets pass to a sibling, a son-in-law, daughter-in-law or civil union partner of one of your children, there is an inheritance tax of 11-16%. New Jersey does exempt the first $25,000 of the transfer though.

If the assets pass to anyone else, there is an inheritance tax of 15-16%, but the first $500 is exempt.

The proposed law is designed to target people who die owning homes in New Jersey but are residents of other states. Most of the estates of these decedents currently do not pay any estate or inheritance tax to New Jersey because the estate tax does not apply to them as a non-resident and the inheritance tax will only affect those who leave money to someone other than immediate family or charity.

If enacted, the modified New Jersey estate tax will require the representatives of people who die as residents outside of New Jersey to file a New Jersey estate tax return and pay a proportional share of taxes.

For example, if a person’s estate is $1,000,000 and they owned property in New Jersey worth $500,000. Normally, if the person was a New Jersey descendant, the tax would be $33,000. In this situation though, since 1/2 of the assets are outside of New Jersey, the tax would most likely be 1/2 of the $33,000.

The proposed tax would surely raise a significant amount of money in this cash strapped state. However, with a Governor highly opposed to any new taxes, I would be surprised it passes.