The federal government recently released new federal state tax exemptions for 2011 and 2012 that benefit the wealthy more than some state legislatures anticipated, with exemptions available up to $5 million per estate and $10 million per couple. Though these high numbers currently leave many states sitting without estate tax revenue they might have been anticipating, New Jersey is not one of these states.
Death tax planning in New Jersey is a bit more complicated than in most states. Ours is one of two states in the country that currently imposes both inheritance and estate taxes at the state level (Maryland is the other). Our estate tax exemption amount is $675,000, the second smallest amount exempted of any state behind Ohio, where only $338,333 is exemptible. Our state's top tax rate for estate taxes is set at 16 percent. Regarding inheritance taxes, New Jersey offers no exemptions, and the top tax rate for these taxes is also set at 16 percent.
It will be interesting to see how other state legislatures react in 2011 to the new federal exemption levels. States may realize that it's necessary to step up and reinstate their own estate and inheritance taxes in order to assist in closing local budget deficits. They may choose to follow a conservative approach and set exemptions to align with federal exemption amounts - Hawaii and North Carolina have both set their estate tax exemption levels to better align with federal levels in 2011 - or they may take a more aggressive approach as New Jersey has in lowering exemption levels. Only time will tell.
Source: Forbes "State Estate Taxes Loom As Big 2011 Issue" by Ashlea Ebeling 12/21/11
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