NJ Estate Tax

[curiousgeorge]

Hello,

Is out-of-state real property part of NJ estate taxable assets?  Gross estate is way, way below the federal exemption, but above the NJ 675K exemption.

Thanks.

[rangerj]

If the deceased is a NJ resident then you need to determine if NJ includes ALL of the deceased assets in the estate for tax purposes. This would generally be the case, but I do not practice in NJ so I cannot give you a determinative answer.

[taxref]

Based on the fact you are asking about NJ, the answer is wildly over complicated.  The reason is because NJ has both an estate tax (a tax paid by the estate on the value of non-exempt property) and an inheritance tax (a tax paid by certain beneficiaries on the value of what they inherit).  Of course, in many cases that results in double taxation. 

All real and tangible personal property of an NJ decedent, no matter where that property is located, must be included in the gross NJ estate for estate tax purposes.  The estate is given a credit, however, for that portion of the gross estate which is located outside NJ.
 
For inheritance tax, beneficiaries who are required to file a NJ inheritance tax return do not have to include inheritances of tangible and real property located outside the state.  

[curiousgeorge]

Thanks so much Taxref for your kind response.

I read the overview - but the language is way too complicated.  www.state.nj.us/treasury/taxation/inheritance_over.shtml 

The overview states:
The New Jersey Estate Tax exclusion was frozen at the 2001 level for decedents dying in 2002 and thereafter. The Estate Tax is an amount equal to the Federal credit for inheritance, estate, succession, and legacy taxes allowable under provisions of the Internal Revenue Code in effect on December 31, 2001. A reduction is permitted for that portion of the credit which is attributable to property located outside New Jersey plus any Inheritance Tax paid to New Jersey.

The statement on the reduction for non-NJ property - does it imply that the calculation for the credit is based on the Internal Revenue Code in Dec 2001?

Thanks again. 

[Ombud]

Feb 15, 2016 23:41:57 GMT -5 curiousgeorge said:

I read the overview - but the language is way too complicated

Don't worry, your CPA can figure it out & explain how your personal situation fits in

[taxref]

"The statement on the reduction for non-NJ property - does it imply that the calculation for the credit is based on the Internal Revenue Code in Dec 2001?"

The reference to the 2001 federal estate tax is where the NJ $675K estate tax credit comes from.  Using that standard, NJ has locked in an amount that many NJ estates would be above.  An expensive state in which to live, many average homes in NJ are now valued at over $675K.

As far as Ombud's advice goes, that is how I do it.  On the (thankfully rare) occasions when I have to work up NJ estate or inheritance returns, I always do them up by fitting the client's exact circumstances to the law, rather than vice versa.  Knowing exactly what to look for, based on the client's situation, is much easier then applying these convoluted rules to the client.  

[ArchietheDragon]

Feb 16, 2016 9:42:54 GMT -5 taxref said:

"The statement on the reduction for non-NJ property - does it imply that the calculation for the credit is based on the Internal Revenue Code in Dec 2001?"

The reference to the 2001 federal estate tax is where the NJ $675K estate tax credit comes from.  Using that standard, NJ has locked in an amount that many NJ estates would be above.  An expensive state in which to live, many average homes in NJ are now valued at over $675K.

As far as Ombud's advice goes, that is how I do it.  On the (thankfully rare) occasions when I have to work up NJ estate or inheritance returns, I always do them up by fitting the client's exact circumstances to the law, rather than vice versa.  Knowing exactly what to look for, based on the client's situation, is much easier then applying these convoluted rules to the client.  

My grandmother died as a NJ resident.   Her estate was below the federal exemption, but was a decent size. My mom was pissed about how much "she" had to pay to NJ.  It ended up being a couple hundred thousand. 

[curiousgeorge]

Thanks everyone.
Perhaps time to move to sunny Florida.