When a New Jersey resident dies leaving property, there are several types of death taxes that will have to be deal with, depending on the specific situation.
The first of these is the federal estate tax, which applies to estate over $5 million. To take care of this tax, the executor must file an IRS Form 706. This form includes both the Estate and Generation-Skipping Transfer tax.
Second, there is New Jersey’s estate tax, which applies to gross estates over $675,000 in value. This tax is dealt with the form IT-Estate, State New Jersey Resident Decedent Estate Tax Return.
Third, New Jersey also has a transfer inheritance tax which is based on the relationship between the property recipient and the decedent. This tax is taken care of with a filing of form IT-R, State of New Jersey Resident Decedent Inheritance Tax Return.
The federal and New Jersey estate tax forms must be filed and all taxes paid off within nine months of the decedent’s death, though there is some additional time this year. The New Jersey inheritance tax return must be filed and taxes paid within eight months of the decedent’s death.
According to the New Jersey Department of the Treasury, New Jersey transfer Inheritance Tax is imposed at graduated rates on property valued at $500 or more that passes from a decedent to a beneficiary. Property which passes to a decedent’s surviving spouse, parents, grandparents, children, stepchildren or grandchildren is wholly exempt from the inheritance tax.
In instances where all of a decedent’s property passes to a surviving spouse or civil union partner, surviving domestic partner, children, stepchildren, parents, grandparents or grandchildren, it isn’t necessary to file an Inheritance Tax return.
Source: nj.com, “N.J. inheritance a head-scratcher for in-law,” Karin Price Mueller, 4 April 2011.