NJ Estate Tax Changes Coming This Year Might Impact Your Will and Estate Planning

NJ Governor Chris Christie signed a new tax package into law in October 2016; while changes to the gas tax made the biggest headlines, modifications to the Estate Tax will have a larger impact on most New Jersey residents. Learning more about the coming changes and what they mean for your will and estate allows you to make the best possible decisions for your legacy and your family.

Phase Out of the NJ Estate Tax

Long maligned for having one of the worst “death tax” laws in the nation, New Jersey joins only Maryland for imposing both an Estate Tax and an Inheritance Tax for its residents. Before the new Estate Tax repeal, decedents had an exemption of just $675,000. For estates above this exemption, a hefty tax levy is imposed to heirs (except the spouse, who is always exempt). Under the provision of the new tax law, the exemption jumps to $2,000,000 on January 1, 2017 before being eliminated entirely in January of 2018.

While the new law is far more friendly to property owners who wish to pass on assets, it has zero impact on the state’s Inheritance Tax. At this time, there are no proposed changes coming for New Jersey’s Inheritance Tax.

What the New Changes Mean for your Will or Estate

The coming changes will impact your will and estate if you own property (real or intangible) that would pass on to others after your death. Anyone living and owning property in New Jersey should revisit their Will and make certain their estate plan has not been affected by the recent changes to death tax laws.

For example, if you have a will created using the $675,000 exemption and are married, your surviving spouse could receive less money under the new law. That $675,000 threshold was often used to set aside inheritances for children with a formula stating “I give the lower of the federal and New Jersey exemption to my children” with the remainder of the estate going to a surviving spouse. With the Estate Tax repeal, this defaults to the Federal exemption of $5.45 million, and only the balance above the Federal exemption going to the surviving spouse. That is likely NOT the distribution scheme many married people had in mind when the executed their estate planning documents. Certainly, the surviving spouse might have some issues with that plan! Since no one likely intended that result, it is important to take a good look at your will and estate plan to determine if any updates are necessary.

Changes to the tax law should trigger a review of your estate and will; you’ll be able to adapt to the new rules and choose the most strategic disbursement of property and funds for your family. Adapting your will to meet the new guidelines can also give you, your spouse and your children peace of mind about your home and property and ensure that everyone is protected and cared for after you are gone.

Contact Askin & Hooker if you are concerned about how the coming Estate Tax changes will impact your will and family. Our team understands the consequences these changes can have on your plans and stands ready to help when you need us most.