Most people have probably not opted to have a conversation with an attorney to discuss the intricacies of estate planning. Let's face it; having a discussion about death isn't one that most people look forward to having. That said, most people in New Jersey may not realize that when they die, depending on the size of the estate, an inheritance and estate tax must be paid to the state
An inheritance tax must be paid by an heir to the state upon a person's death. How much is paid to the state depends on the relationship of the heir to the decedent.
For example, spouses, domestic partners and descendants (children and/or grandchildren) of the deceased are exempt from paying an inheritance tax, and it will get subtracted from the estate before assets can pass on to the estate's heirs and beneficiaries.
An estate tax, on the other hand, is based on the value of the deceased's estate. For example, an estate worth more than $675,000 will be taxed by the state -- less than that is exempt from an estate tax.
Other states have passed new laws recently to get rid of the inheritance tax. According to a media report, the state of Indiana just passed a new law ending the death tax. This is good news for people who want to leave valuable assets to their heirs and beneficiaries without costing them a fortune in taxes.
Because of the recent success in Indiana, other tax lobbyists are attempting to get similar laws passed in their respective states. It remains to be seen if the New Jersey's inheritance and/or estate tax will be targeted by lobbyists.
Source: Forbes.com, "Another state death tax kicks the bucket, Will more fall?" Ashlea Ebeling, March 20, 2012