New Jersey Estate Planning Considerations
New Jersey is a Common Law State, which means the rules governing the ownership, division, and inheritance of income and property acquired by a husband or wife during their marriage holds that subject to various qualifications, each spouse owns and has complete control over his or her income and property.
Last Will and Testament
The minimum age of a person competent to make a will is 18. The number of witnesses necessary to execute a will is two.
The custodial arrangement terminates when:
- The minor child reaches age 21 for custodial transfers made by irrevocable lifetime gift, will, or trust, or exercise of a power of appointment (unless the donor indicates in the writing that the termination should be made at an earlier age).
- The minor child reaches age 18 for other custodial transfers.
- The minor child dies.
Dying without a Last Will, the New Jersey Laws of Intestacy
The estate goes to the surviving spouse or domestic partner (DP), as follows:
- If there are no surviving descendants or parents, —100% of the estate
- If all descendants are also descendants of the spouse or DP and spouse or DP has no other surviving descendants, —100% of the estate
- If there are no surviving descendants, but a parent survives—the first 25% of the estate (but not less than $50,000 nor more than $200,000) plus 75% of the balance of the estate
- If all surviving descendants are also descendants of the spouse or DP and the spouse or DP has one or more surviving descendants who are not descendants of the decedent—the first 25% of the estate (but not less than $50,000 nor more than $200,000) plus 50% of the balance of the estate
- If one or more of the decedent’s surviving descendants is not a descendant of the surviving spouse or DP—the first 25% of the estate (but not less than $50,000 nor more than $200,000) plus 50% of the balance of the estate
If there is no surviving spouse, or if a portion of the estate does not go to the spouse:
- 100% to descendants, by representation (see NJS §3B:1‐2)
If there is no surviving spouse or descendant:
- 100% to surviving parent or parents equally
If there is no surviving spouse, descendant, or parent:
- 100% to siblings equally, by representation (see NJS §3B:1‐2)
If none of the above:
- Intestacy laws outline further distribution steps to the level of grandparents, then stepchildren, and their descendants. See N.J.S. §3B:5‐4(d), (e), (f).
- If no legally described recipient can be found, estate assets go to the state of New Jersey.
New Jersey follows the Uniform Fiduciary Access to Digital Assets Act to ensure that testators can retain control of their digital property and plan for its ultimate disposition.
The Transfer Inheritance Tax rate and exemption amount are dependent on the amount received and the relationship between the decedent and the beneficiary.
No tax is imposed on Class A beneficiaries (father, mother, grandparents, descendants, spouses, civil union partners, or domestic partners).
Class C beneficiaries (brother or sister of a decedent; husband, wife, or widow(er) of a decedent; civil union partner or surviving civil union partner of a child of a decedent) are taxed 11%–16%, with the first $25,000 exempt.
Class D beneficiaries (not otherwise classified) are taxed at 15%–16%, with no tax on transfers having an aggregate value of less than $500.
Charitable institutions are exempt from tax. Also exempt are transfers for public purposes made to New Jersey (or any NJ political subdivision).
Life insurance proceeds paid to a named beneficiary are exempt from tax.
Transfers for Federal civil service retirement benefits payable to a beneficiary other than the estate, executor, or administrator are exempt from tax.
Annuities payable to survivors of military retirees are exempt from tax.
Qualified employment annuities paid to a surviving spouse, civil union partner, or domestic partner are exempt from tax.
Credit Estate Tax
New Jersey does not impose an estate tax on decedents dying on or after January 1, 2018.
Before January 1, 2018, the New Jersey Estate Tax conformed to the provisions of the federal Internal Revenue Code for determining the value of the estate that would be subject to New Jersey Estate Tax. The Estate Tax was an amount equal to the federal credit for an inheritance, estate, succession, and legacy taxes allowable under provisions of the federal tax code in effect on December 31, 2001.
The exemption amount was $675,000 in 2016 and $2 million in 2017. The top tax rate was 16%.
New Jersey does not impose a GST tax.
New Jersey does not impose a gift tax.