All things considered, there are better places to die than New Jersey.
Currently NJ is one of the few lucky states where the assets of the deceased are subject to both an inheritance tax and an estate tax, in addition to federal estate tax obligations that might apply. What’s more the threshold for estate tax exemption in New Jersey is only $675,000.00, a threshold many families and individuals will exceed, while the federal exemption is a whopping $5.34 million dollars affecting mostly the estates of the rich. While Maryland and New York have both opted to substantially raise their Estate Tax Exemption, there has been no attempt thus far to bring NJ state tax exemptions in line with federal amounts.
However, at the beginning of June NJ state senator Raymond Lesniak announced he plans to introduce legislation to repeal New Jersey’s estate tax and reinstate the so called “millionaires tax”, a non-death related tax on household incomes over $350,000.
One of the main reasons why this is being discussed is to close the $2.7-billion state budget shortfall through June 2015. It is estimated this proposal will bring in $850-million each year, which is required to close the fiscal year’s budget gap.
At least one independent study has indicated that the combination of estate tax, high property taxes and a previous millionaire’s tax drove wealthy residents from the state. Whilst many would like to repeal or raise the exemption for the estate tax, without offsetting revenue it would be politically difficult to move forward. Despite this Senator Lesniak still plans to move the bill forward. “I’m hoping that this estate tax repeal would present an opportunity for both Democrats and Republicans to get something that they want and help us solve the budget crisis.”
Despite its good intentions, it is likely the entire repeal exercise is a non-starter as Governor Chris Christie has promised to veto any attempt to reinstate the millionaire’s tax. Without this, a repeal or raising of the estate tax is unlikely as it would not have any offsetting revenue component and would drive the state further into a budget deficit.
So for the foreseeable future, NJ residents are stuck with both the inheritance and estate tax with its extremely low threshold. If you are concerned about your obligations under these taxes in New Jersey, Frank Campisano can help you design a strategy that gets more of your estate into the hands of your heirs and less into the hands of the government.