New Jersey “Death Tax” Basics

Death vs. Inheritance vs. Estate Taxes in New Jersey: What They Are & How They Apply

 
Death, Inheritance, and Estate Taxes in New Jersey – What’s the Difference?

Understanding Which “Death Taxes” Still Exist in New Jersey

(and Which Don’t)

New Jersey no longer has a state estate tax, but it still has an inheritance tax, and large estates may face a federal estate tax. Here’s how these fit together.

What People Mean by “Death Tax”

When people talk about “death taxes,” they’re usually using a nickname for one or more of these:

  1. Federal Estate Tax – a federal tax on very large estates.

  2. New Jersey Estate Tax (historical) – a state-level tax that used to apply to certain NJ estates, but has been repealed for deaths on or after January 1, 2018.

  3. New Jersey Inheritance Tax – a state tax on certain beneficiaries who inherit from a New Jersey decedent. This tax still exists.

So in modern New Jersey planning:

  • There is no current New Jersey estate tax for deaths in 2018 or later.

  • There is still a New Jersey inheritance tax, depending on who receives what.

  • Large estates may also face a federal estate tax at the national level.

1. Federal Estate Tax

(National, Not NJ-Specific)

The federal estate tax is a tax imposed by the United States government on the transfer of a person’s wealth at death. It is based on the size of the taxable estate (plus certain lifetime gifts), with an exemption that shields most estates.

  • As of 2025, the federal estate tax exemption is approximately $15 million for individuals and $30 million for married couples, under recent federal legislation (indexed for inflation going forward).

  • Only the portion of the estate above that exemption is potentially taxed, at rates up to 40%.

For most New Jersey families, the federal estate tax is not the main concern—especially compared to the New Jersey inheritance tax. But for higher-net-worth clients, it is still a major planning driver.

2. New Jersey Estate Tax

(Historical Only)

New Jersey used to impose its own state estate tax, based on the size of the entire estate. That tax has been:

  • Phased out and fully repealed for individuals who die on or after January 1, 2018.

Historically:

  • For deaths on or before December 31, 2016, the exemption was $675,000.

  • For deaths on or after January 1, 2017 but before January 1, 2018, the exemption was $2 million.

  • For deaths on or after January 1, 2018, no New Jersey estate tax is imposed.

This history still matters when:

  • You’re administering the estate of someone who died before 2018, or

  • You’re reviewing old planning documents that were designed around the former NJ estate tax.

But for current planning, the focus has shifted to:

  • Federal estate tax (for larger estates); and

  • New Jersey inheritance tax (for many everyday families, especially those leaving assets to non-lineal heirs).

3. New Jersey Inheritance Tax

Still Very Much Alive)

New Jersey’s inheritance tax is different from an estate tax:

  • It’s a tax on beneficiaries, based on who they are and what they receive, rather than a single tax on the overall estate value.

Who Is Taxed?

Beneficiary Classes

New Jersey divides beneficiaries into classes based on their relationship to the person who died (the “decedent”).

Class A – Exempt (No NJ Inheritance Tax)
Includes:

  • Spouse

  • Civil union partner or domestic partner (subject to dates in the statute)

  • Parents and grandparents

  • Children (including legally adopted children)

  • Grandchildren and other lineal descendants

  • Stepchildren (but not all step-grandchildren)

Class A beneficiaries do not pay New Jersey inheritance tax.

Class C – Taxable at Various Rates
Includes, for example:

  • Siblings (brothers, sisters, including half-siblings)

  • Son-in-law or daughter-in-law (certain spouses of children)

Class C beneficiaries generally:

  • Have a small exemption (e.g., first portion of inheritance exempt), and

  • Pay tax on amounts above that exemption, at graduated rates (often 11%–16% depending on the amount).

Class D – Typically More Distant Individuals
Includes:

  • Friends

  • Cousins

  • Most other individuals not listed in Classes A, C, or E

Class D beneficiaries usually:

  • Have a very small exemption (e.g., a few hundred dollars), and

  • Pay 15%–16% on amounts above that.

Class E – Tax-Exempt Beneficiaries

Includes:

  • Charitable organizations

  • Educational and religious institutions

  • Many governmental entities

Class E beneficiaries are exempt from New Jersey inheritance tax.

(Class B was eliminated decades ago and no longer applies.)

What Is Taxed?

For a New Jersey resident decedent, the inheritance tax generally applies to:

  • All property (tangible and intangible) they owned at death, wherever located, if passing to taxable beneficiaries (Class C or D).

For a nonresident who owned New Jersey property:

  • The tax may apply to New Jersey-situs real estate and certain tangible personal property, again depending on who inherits.

Some common items and rules:

  • Life insurance payable to a named beneficiary (not the estate) is typically exempt from NJ inheritance tax.

  • Many assets cannot be retitled or transferred without a tax waiver from the New Jersey Division of Taxation (e.g., NJ real estate, certain financial accounts).

Deadlines and Interest

  • If an inheritance tax return is required, it is generally due within 8 months of the date of death, and any tax due is also payable then.

  • Interest at 10% per year can be charged on unpaid tax after 8 months.

4. Simple Examples:

How These Taxes Might Apply

Let’s look at a few simplified New Jersey scenarios. (These are examples only, not calculations for any specific case.)

Example 1 – Everything to a Spouse

Facts:

  • NJ resident dies, leaving a $1.5 million estate entirely to a surviving spouse.

Result:

  • Federal estate tax: Unlikely, because the estate is below the federal exemption and the Unlimited Marital Deduction generally protects transfers to a U.S. citizen spouse.

  • NJ estate tax: None (death occurs in 2018 or later).

  • NJ inheritance tax: None, because the spouse is a Class A beneficiary, fully exempt.

Takeaway: For many married couples, New Jersey’s inheritance tax may not apply at the first death if everything goes to a surviving spouse.

Example 2 – Estate Left to Adult Children and a Sibling

Facts:

  • NJ resident dies with a $800,000 estate.

  • $500,000 goes equally to two adult children.

  • $300,000 goes to the decedent’s sister.

Result:

  • Federal estate tax: None (far below exemption).

  • NJ estate tax: None (post-2017 death).

  • NJ inheritance tax:

    • Children are Class A → no inheritance tax on their shares.

    • Sister is Class C → her $300,000 share is subject to NJ inheritance tax at Class C rates (after any applicable exemption and graduated rates).

Takeaway: Even a modest NJ estate can trigger significant inheritance tax if part of the inheritance goes to siblings or other non-lineal relatives.

Example 3 – Estate Left to a Close Friend

Facts:

  • NJ resident leaves $400,000 to a long-time friend.

  • No spouse, children, or close relatives.

Result:

  • Federal estate tax: None (below exemption).

  • NJ estate tax: None (post-2017 death).

  • NJ inheritance tax:

    • Friend is Class D → generally taxed on almost the entire amount (above a very small exemption), at approximately 15%–16%.

Rough implication: A large slice of that $400,000 could go to New Jersey in inheritance tax instead of to the friend.

Takeaway: Leaving assets to friends, cousins, or other non-lineal beneficiaries can produce substantial NJ inheritance tax, even when the overall estate is not huge.

5. How Proper Planning Can Help Manage These Taxes

Thoughtful planning can’t eliminate every tax, but it can:

  • Change who pays (for example, the estate vs. the beneficiary).

  • Use Wills, revocable and irrevocable trusts, life insurance, and beneficiary designations to re-route assets in tax-efficient ways.

  • Coordinate charitable gifts with Class E exemptions.

  • Take advantage of federal exemptions and marital deductions where appropriate.

The right approach depends on:

  • Who you want to benefit (spouse, children, siblings, friends, charities),

  • The nature and size of your assets (home, retirement accounts, investments, business interests), and

  • Your timeline and flexibility for making changes.

Modern tools and up-to-date legal resources help identify current law, but professional judgment is needed to design a plan that fits your specific situation. No plan can guarantee that future laws won’t change, but planning with today’s rules in mind is far better than ignoring them.

How Simon Law Group Helps New Jersey Families with “Death Taxes”

At Simon Law Group, LLC in Somerville, New Jersey, we help clients:

  • Understand the difference between federal estate tax, New Jersey inheritance tax, and the now-repealed NJ estate tax.

  • Identify whether their current plan is likely to trigger NJ inheritance tax, especially for siblings, nieces/nephews, friends, or other non-lineal beneficiaries.

  • Integrate these tax considerations into Wills, revocable trusts, beneficiary designations, special needs planning, charitable planning, and business succession.

  • Coordinate with financial and tax advisors so that the legal documents and tax strategies work together.

We can’t promise to avoid every tax or guarantee any result, but we can help you understand the landscape and make informed decisions about how and when to transfer your assets.

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