Estate planning can have a wide variety of goals, depending on a person’s financial situation, family arrangement, moral values, and so on. One important issue to account for in all estate planning, though, is tax planning, and particularly estate and inheritance tax planning. This is particularly important for those with large estates that will exceed the state and federal exemption amounts.
At the federal level, the estate tax is currently set, very generously, at $5.45 million per individual. This means that individual taxpayers are able to leave that amount as inheritance without incurring federal estate or gift tax. Married couples may together leave twice that amount without incurring estate tax obligations. At the state level, New Jersey levies both an estate tax and an inheritance tax. The estate tax exemption is currently at $675,000, meaning that estates which exceed this amount are subject to the tax.
New Jersey’s estate tax exemption is currently the lowest in the country, though because of the double taxation—New Jersey is one of only two states that impose both estate tax and inheritance tax—this is not necessarily an impressive matter. The fact that New Jersey has this layered tax regime has prompted a good deal of political debate, with Republicans and business groups lobbying for the repeal of the estate tax over a number of years.
Republicans argue that the heavy tax regime drives retirees to other states with less burdensome taxation. This year, it seems, may actually be the year for the repeal to happen, as more Democrats have expressed support for repeal of the tax. As leverage, however, they may be requesting an increase to the gas tax.
In our next post, we’ll continue looking at this issue and the importance of working with an experienced attorney to minimize one’s estate tax obligation.
Njspotlight.com, “Is New Jersey’s estate tax prompting retiring residents to seek greener pastures?,” John Reitmeyer, April 4, 2016.
Nj.com, “N.J. lawmakers move on eliminating estate tax,” Samantha Marcus, February 29, 2016.