When it comes to estate planning, one of the most important aspects which most people pay attention to is avoiding unnecessary tax liabilities. This has been an especially important concern for many people in New Jersey, since it is one of only two states in which people are required to pay the estate tax as well as the inheritance tax. However, some state lawmakers are now looking to change this situation.
The inheritance tax requires beneficiaries other than a decedent’s spouse, children, parents or grandparents to pay taxes if their inheritance exceeds $25,000. Lawmakers are arguing that this is discriminatory and is an unfair burden on beneficiaries who are willed assets from uncles, aunts, siblings, cousins or other relatives. Even those who inherit assets from friends will have to pay the inheritance tax. However, lawmakers are now looking to propose legislation which would repeal the inheritance tax in New Jersey.
Currently, state laws require a decedent’s estate assets over $675,000 to be taxed via the state estate tax laws. However, critics argue that many homeowners already easily meet this threshold without necessarily being wealthy. A proposed law with bipartisan support is looking to raise this limit to equal the current federal threshold, which is $5.34 million. The governor argues that many wealthy individuals and families are leaving the state to avoid these additional taxes, while others warn that the proposed law could reduce the state’s tax income significantly.
Therefore, those looking to create an estate plan in New Jersey may want to pay attention to the latest developments regarding potentially changing the rules regulating the estate tax and the inheritance tax. The changes ultimately enacted by lawmakers could make a significant difference to one’s estate planning strategies. Many will want to update their current estate plans in order to reflect the new changes if they in fact do occur.
Source: Courier-Post, “New Jersey lawmakers may change inheritance tax“, , Aug. 24, 2014