NJ’s inheritance tax depends on the relationship between the deceased and the beneficiary.
How It Works
Class A (spouses, children, grandchildren, parents) pay zero. Class C (siblings) have a $25,000 exemption then pay 11%–16%. Class D (everyone else) pay 15–16% from dollar one.
Common Scenarios
Leave everything to spouse and children? Zero inheritance tax. Leave $100,000 to a sibling? After the $25,000 exemption, they could owe $8,250–$12,000.
Life Insurance
Proceeds payable to Class A beneficiaries are exempt. Proceeds to Class D beneficiaries are taxable — an often-overlooked planning opportunity.
Planning Considerations
Strategies include restructuring beneficiary designations, using trusts, lifetime gifting (NJ has no gift tax), and ensuring life insurance beneficiaries are Class A.
Disclaimer: The information provided is for general educational purposes only and does not constitute tax, legal, or investment advice. This content is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. Tax outcomes depend on your specific facts and circumstances. Viewing this material does not create a CPA-client relationship. Personalized advice is provided only through a signed engagement letter.
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