On Friday, September 30, 2016, New Jersey lawmakers held a press conference announcing significant changes affecting the New Jersey Estate Tax. The video and transcript of the conference can be accessed by clicking here.
The New Jersey Estate Tax applies to the estates of New Jersey residents and currently has an exemption of only $675,000. Under the proposal, the New Jersey Estate Tax exemption will be increased to $2.0 million per person on January 1, 2017; and effective January 1, 2018, the New Jersey Estate Tax will be eliminated entirely.
The Governor did not mention the New Jersey Inheritance Tax, which is a separate tax on non-lineal (i.e. beneficiaries who are not a spouse, child, or more remote issue etc.) heirs. Therefore, it is not known if the New Jersey Inheritance Tax will also be affected.
The proposal also included increases in the New Jersey gross income tax exclusions on pension and retirement income to: (i) $100,000 for joint filers, (ii) $75,000 for individuals, and (iii) $50,000 for those who are married filing separately. The higher exemptions would be phased in over four years under the current proposal.
We understand that a vote has been delayed. It is also possible that the final legislation will differ from the outline presented on September 30th. We will continue to monitor the status of the proposal, and any changes from what is being currently discussed. If passed, these changes would be a substantial modification in New Jersey estate taxation and we strongly encourage you to review your estate planning document with any new legislation in mind.