October 20, 2016
State of New Jersey Passes Law that Completely Repeals the State Estate Tax by 2018
New Jersey Governor, Chris Christie, signed Assembly Bill No. 12 ("AB12") into law on October 14, 2016, repealing New Jersey's state estate tax effective January 1, 2018. This new law was enacted as part of a compromise between the Legislature and the Governor to pass an increase in New Jersey's gas tax.
In addition to repealing the estate tax, the legislation raises the state gas tax by 23 cents per gallon to fund the state's idle infrastructure projects together with other sales and income tax cuts. The statute quickly implements the estate tax repeal by maintaining the current exemption amount of $675,000 for the remainder of 2016, before raising the state estate tax exemption amount to $2 million, effective January 1, 2017, and declaring that "on or after January 1, 2018, there shall be no tax imposed."
Other important highlights of the estate tax repeal legislation include the following:
- Prior to the elimination of the estate tax in 2018, AB12 provides a slightly modified tax rate schedule for the 2017 tax year, imposing a top rate of 16% for amounts of a decedent's taxable estate over $10.1 million (up from $10.040 million).
- While AB12 repeals New Jersey's state estate tax, the law does not address New Jersey's inheritance tax. New Jersey's inheritance tax will remain in effect for the foreseeable future for transfers of real and tangible personal property transferred to non-exempt individuals and other transferees (taxed at rates up to 16%).
- The estate tax repeal was designed to make New Jersey more attractive to current and future residents and retirees, following concerns that individual taxpayers were leaving the state in order to seek greater tax advantages elsewhere.
- The estate tax repeal will eliminate the need for estate tax planning for the majority of New Jersey residents under the federal lifetime exclusion amount ($5,450,000 in 2016).
Since New Jersey has begun the process of eliminating its state estate tax, individuals who are residents of New Jersey should have their estate plans reviewed by an estate planning professional to determine how the repeal will affect them.
If you have any questions or concerns about how New Jersey's state estate tax repeal affects you and your estate plan, please contact our offices at your earliest convenience to be directed to a Marcum Tax Advisor.