There are multiple ways that your estate can be subject to taxes after you die. If the sale of estate assets leads to financial gains, the estate may have to pay income taxes. Estates worth more than a certain amount may be directly subject to estate taxation.
There is also the possibility of an inheritance tax that could directly affect the beneficiaries of your estate. Planning for taxes when thinking about your legacy often means taking steps to minimize taxation. New Jersey exempts certain people from inheritance taxes. To whom can you leave a bequest without burdening them with an inheritance tax?
State law protects the inheritance rights of immediate family
New Jersey recognizes that some people may depend on inherited assets for their own solvency after the loss of a loved one and does not tax these individuals. Your immediate family members can usually receive an inheritance without an obligation to pay tax on it.
Both spouses and civil or domestic union partners can receive an inheritance without paying taxes on it. The same is true of children and grandchildren. People can also leave assets for their parents or grandparents and stepchildren without taxation.
However, step-grandchildren or their progeny could potentially be subject to some degree of taxation, as could siblings of the deceased or spouses of children given a specific bequest. Any other recipient could also be subject to taxation for their inheritance.
Planning carefully to reduce taxes on your estate can help you maximize your legacy while protecting the people you love from additional stress when they will already be mourning your loss.