Estate Tax Planning in New Jersey

Reduce Tax Burdens, Protect Your Legacy, and Preserve More for the People You Love

Estate planning is about more than writing a will or naming a beneficiary. It’s about protecting your legacy – and making sure the people you care about receive what you intend to leave behind. In New Jersey, estate tax planning means thinking carefully about how your assets are structured, who receives them, and what tax consequences could follow.

While New Jersey no longer has its own estate tax, there are still federal estate taxes, state inheritance taxes, gift tax rules, and capital gains to consider. Even families who don’t consider themselves wealthy can end up paying more than they should without a plan in place.

Working with a New Jersey estate planning lawyer at Williams Law Group, LLC helps you understand what applies to your situation and how to take full advantage of legal tools that reduce or eliminate unnecessary taxes.

Does New Jersey Have an Estate Tax?

New Jersey eliminated its state estate tax in 2018. That change brought relief to many families, but it also created confusion. Some assume there are no estate-related taxes left to worry about – which isn’t true.

While New Jersey no longer collects estate tax, the federal government still does. And New Jersey continues to impose an inheritance tax, which affects many estates depending on who inherits the assets.

Families often overlook these distinctions. Our experienced lawyers help clarify what applies and how to minimize exposure with a well-drafted estate plan.

Federal Estate Tax Still Applies to Larger Estates

The federal estate tax exemption adjusts each year. For 2024, the exemption is $13.61 million per individual, or $27.22 million for married couples who plan properly.

This might seem like more than most families need to worry about, but the calculation includes the total value of your estate – real estate, retirement accounts, investment portfolios, business interests, and even life insurance policies. For some, the numbers add up faster than expected.

If your estate exceeds the exemption, the portion above it may be taxed at rates up to 40%. A lawyer can use strategies such as trusts, gifting, and exemptions to reduce the size of the taxable estate and preserve more of your legacy for your heirs.

New Jersey Still Collects Inheritance Tax

New Jersey’s inheritance tax is separate from estate tax and depends on who receives your assets, not how much your estate is worth. The closer the relationship, the lower the tax rate – or in some cases, no tax at all.

Understanding how this tax works is key to avoiding surprises. For example, a niece or unmarried partner may owe thousands in taxes even if the inheritance is modest.

Here’s how the tax typically applies:

• Class A Beneficiaries: Spouses, children, grandchildren, parents – generally, exempt from inheritance tax.
• Class C Beneficiaries: Siblings and in-laws – taxed between 11% and 16% depending on the amount inherited.
• Class D Beneficiaries: Friends, cousins, unmarried partners – taxed at 15% or 16%.
• Class E Beneficiaries: Charities and exempt organizations – no tax.

A lawyer can help you structure your estate to reduce or eliminate inheritance tax exposure, if you intend to leave assets to extended family or close friends.

Gift Tax Rules and Lifetime Exemptions

New Jersey does not have a state-level gift tax, but federal gift tax rules still apply. Giving away assets during your lifetime may reduce the value of your estate – and your eventual estate tax liability – but it must be done carefully.

The IRS allows an annual gift tax exclusion – $18,000 per recipient in 2024 – without reducing your lifetime exemption. Anything above that amount may reduce your available estate tax exemption unless properly structured.

Gifting can be a powerful estate planning strategy when used correctly. But improper gifting can trigger audits, disqualify beneficiaries from Medicaid, or result in unexpected tax obligations. A lawyer helps you evaluate when and how to give, and what documentation is necessary to protect your plan.

Capital Gains and the Step-Up in Basis

Capital gains tax is another often-overlooked issue in estate planning. When someone inherits property and later sells it, they may owe tax on the increase in value – unless the step-up in basis rule applies.

Under current federal and New Jersey law, inherited assets receive a step-up in basis to fair market value at the time of death. That means any appreciation during the decedent’s lifetime is erased for tax purposes, significantly reducing or eliminating capital gains.

However, gifting the asset during your lifetime – or using the wrong trust structure – may cause your beneficiaries to lose that benefit. A lawyer can help you compare your options and avoid decisions that backfire on your heirs.

Mistakes That Can Cost Families Thousands

Even small mistakes in estate tax planning can lead to serious financial consequences. Many of these issues aren’t discovered until after a death – when it’s too late to fix them.

Some of the most common problems include:

• Leaving Large Bequests to Taxable Beneficiaries: Triggering inheritance tax that could have been avoided.
• Failing to Use Trusts or Marital Deductions: Causing overexposure to federal estate tax.
• Forgetting to Account for Life Insurance: Which may inflate the estate’s value and create unintended tax liability.
• Gifting Without Strategy: Reducing your lifetime exemption or creating capital gains issues for the recipient.

Tax laws are complicated and change often. A New Jersey estate planning lawyer stays ahead of these changes and builds a plan around your specific situation – not a generic formula.

Tools to Reduce Estate Tax Exposure

A complete estate tax plan uses more than just a will. The right combination of legal tools can significantly reduce the taxable value of your estate and protect your beneficiaries.

Depending on your goals, your estate plan might include:

• Revocable and Irrevocable Trusts: Shift assets out of your estate or manage how they’re distributed.
• Charitable Trusts or Foundations: Provide tax benefits while supporting causes you care about.
• Spousal Lifetime Access Trusts (SLATs): Allow you to reduce your estate while maintaining family access.
• Irrevocable Life Insurance Trusts (ILITs): Keep insurance proceeds outside the taxable estate.
• Qualified Personal Residence Trusts (QPRTs): Transfer property to heirs at a reduced taxable value.

Choosing the right tools depends on your family, your assets, and your long-term goals. An estate planning lawyer makes sure the plan is legally sound, well-coordinated, and tailored to your needs.

Get the Right Plan for Your Family – and Your Legacy

Estate tax planning in New Jersey requires more than good intentions. It requires legal precision, financial awareness, and the ability to see problems before they happen. Every dollar lost to tax is a dollar your family doesn’t receive – and every plan should be built with that in mind.

Williams Law Group, LLC helps families in Morris County, Essex County, and throughout New Jersey develop tax-conscious estate plans that hold up when it matters most.

Schedule a consultation to start building a plan that protects your legacy – and the people you built it for. Contact us today.