Repeal of New Jersey Estate Tax. On October 14th, Governor Christie signed into law a bill eliminating New Jersey’s state estate tax. Below are the highlights:
- Beginning January 1, 2017, the New Jersey estate tax exemption will increase from $675,000 to $2,000,000. This means that the increased exemption will be available for individuals dying in 2017.
- Beginning January 1, 2018, the New Jersey estate tax will be eliminated in full.
- The NJ inheritance tax still remains. The NJ inheritance tax is a death tax imposed on transfers to beneficiaries who are not charities or spouses, children, grandchildren, or parents of the deceased. The top inheritance tax rate remains at 16%, but whether it is imposed and what rate applies will depend on the amounts given to each beneficiary and his or her relationship to the decedent. NJ residents who are leaving property to less immediate family members – such as cousins or siblings – may care about the inheritance tax.
New Beneficiary Notice Requirements for NJ Trusts. NJ recently adopted the Uniform Trust Code, which changes a trustee’s duty to report certain trust information to beneficiaries. The most important provisions are:
- Trustees of existing NJ trusts must now generally disclose the trust’s existence to certain trust beneficiaries, and keep them regularly informed about the trust.
- Trusts created after July 2016 can “opt out” of the notice requirements above by including specific language to that effect in the trust agreement. The trust cannot, however, opt out of the trustee’s duty to respond to an affirmative request for information by a beneficiary who is age 35 and over.
Recommendations. NJ residents should review their estate plans in light of the estate tax repeal to understand the potential impact of the new law. For example, a Will may direct that a trust for spouse be created with an amount that would have been $675,000 under the old law, but will be much more than that under the new law. Some individuals may not have intended for a larger amount to pass to a trust but, instead, would prefer more to pass outright to a surviving spouse.
In addition, individuals who are trustees of NJ trusts should contact an attorney to discuss compliance with the new beneficiary notice requirements. Trustees will need to determine the trust beneficiaries to whom trust information must be sent, and how often. Grantors of NJ trusts should also discuss these beneficiary notice requirements with their trustees, in order to better understand the practical implications of these new requirements.