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In New Jersey, domestic partners exempt from state inheritance tax

Same sex couples in New Jersey, while they do have some of the same advantages as heterosexual couples, face unique challenges and issues that heterosexual couples do not. One example of this is that New Jersey, as our regular readers know, imposes an estate tax where the value of a deceased person's estate exceeds $675,000. Generally speaking, gifts to a surviving spouse are fully deductible for purposes of New Jersey estate tax. This is known as the unlimited marital deduction.

Under New Jersey Law, same sex partners and opposite sex partners older than 62 can register as domestic partners. Doing so allows them to take advantage of certain benefits, including exemption from inheritance tax for transfers between partners. That law was passed in 2004. In 2006, though, New Jersey passed the Civil Union Act, which made a surviving civil union partner a Class A beneficiary, meaning they were exempt from New Jersey inheritance tax.

While assets passing from a deceased person to their surviving civil union partner qualify for the unlimited marital deduction, those passing from a surviving domestic partner do not. For this reason, same sex couples who registered as domestic partners back when that was the only option may do well to enter into a civil union.

While such benefits are available at the state level for same sex couples, they are not available at the federal level. All the more reason for same sex couples to ensure that their estate plan says exactly what they want it to say and that they work with an attorney and financial adviser to determine how to achieve their other estate planning goals.

Source: nj.com, "Biz Brain: How do domestic partners inherit in New Jersey," Karin Price Mueller, June 18, 2012

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