Jersey Journal

New Jersey's Death Taxes Are Hanging In For Now

The Jersey Journal — February 22, 2016

By Joan Quigley / The Jersey Journal

Many people were surprised the Governor didn't push for a cut in estate or inheritance taxes during his budget address. It had been such a hot topic last year.

Then he'd hinted he might trade-off lower estate taxes for an increase in fuel taxes, an idea that went nowhere. Probably because the money state coffers would lose from fewer death taxes would be more than the increase in the gas tax. This year the Governor didn't mention either tax and actually said there was no Transportation Trust Fund crisis.

However, legislators from both parties know they must find money for TTF, and they're still griping that so-called death taxes here are too much higher than similar federal taxes. Others counter that only the wealthy would benefit from a decrease.

Let's review the difference between estate taxes and inheritance taxes. In general, estate taxes come, literally, out of the estate a deceased person leaves behind, no matter who inherits what. There's one exception. Spouses don't have to pay New Jersey estate taxes. Inheritance taxes, on the other hand, are paid by individual heirs, except spouses and direct descendents, out of the share they receive from an estate. In 2013 estate tax revenues were $325,331,068 with $28,236,237 of that amount from estates valued at less than a million. Such estates paid an average of $99,000 in taxes. Inheritance taxes that year totaled $294,483,805.

Many states have neither death tax and while some states have one or the other. New Jersey is one of only two states with both.

New Jersey levies a tax on any estate valued at more than $675,000 while federal taxes don't kick in until the estate reaches $5.3 million. Estates consist of cash, real estate, retirement and bank accounts, life insurance and other assets. Real estate prices rose significantly since 2002, when the present rate schedule was set, so more estates today may be subject to taxation.

Remax estimates an average home in New Jersey is worth $275,000. Add in a savings account, a car, some jewelry and insurance and you know estate taxes don't affect only the top one percent.

Assemblyman Joseph Lagana, D-Bergen, wants to lift the current threshold for New Jersey estate taxes to $1.5 million and exempt more next-of-kin family members from inheritance taxes. He hopes the changes will encourage more people to stay in New Jersey after retirement, rather than moving to other states so their kids can inherit more of Mom and Dad's savings.

Assemblyman Tim Eustace, also D-Bergen, has two Republican and two other Democratic co-sponsors of his bill that would exempt the value of a decedent's primary residence from any estate taxes.

There were several pieces of legislation introduced last session but none were even seriously considered, and so far no others have been introduced this year. Don't be surprised if more legislators jump in and offer other ideas to help heirs while minimizing the negative impact on the Treasury.

Meanwhile, liberal groups such as New Jersey Policy Perspective and New Jersey Citizen Action oppose any changes in any death taxes. Gordon MacInnes, head of NJPP, says only four percent of New Jerseyans who die each year have to pay estate taxes. Others counter that's because so many leave the state after retirement and manage to avoid those very taxes.

There are dozens of reasons retirees move out of New Jersey and death taxes may be one of them. So while they weren't made a priority last week, I predict they soon will be.

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