A person can give an unlimited amount of property to their spouse or to charity without any gift or estate tax. However the amount of property that can be transferred to children and others without estate tax is limited. The current “exclusion” is $5,450,000 under federal law, $4,187,500 in New York, and $675,000 in New Jersey.
Realistically, New Jersey’s low exclusion offers little relief. For a person leaving their children a $700,000 home, $500,000 of life insurance, and $800,000 of other assets, the estate would pay no federal estate tax but $106,000 of New Jersey estate tax. Larger estates are taxed with rates as high as 16%. This has caused some New Jersey residents to move out of State, to States with a lower estate tax. Under a new law, you may not need to move after all.
As of January 2017, the New Jersey exclusion is raised to $2,000,000, so there would be no estate tax to pay on the above example. As of January 2018, the New Jersey estate tax will be completely eliminated. Please note however that other laws remain unchanged. The federal tax rate remains 45%, the New York rate as high as 16%, and New Jersey retains a tax on gifts to anyone other than spouses, children, and grandchildren.
We hope you find the foregoing useful. The impact of this law change can vary. We plan with our clients to achieve their goals, from providing for spouses and minor children, to minimizing estate tax, capital gains and income taxes, and addressing Elder Law and Medicaid needs. As finances, family situations, and other circumstances change over time, we invite you to contact us to update your estate plan to your current needs. Thank you.
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The content in this document is provided for informational purposes only, and should not be construed as legal advice or an offer to perform services on this subject matter. Contact Visci & Associates to schedule a consultation at our offices in New York and New Jersey.