New Jersey no longer imposes an estate tax on the estates of people who die on or after January 1, 2018. It does, however, still impose a separate New Jersey inheritance tax on certain transfers at death.
The inheritance tax is based primarily on who receives the property.
A transfer to a spouse or child may be completely exempt. The same transfer to a sibling, niece or nephew, friend, or unmarried partner can incur a substantial tax.
The amount of tax may also depend on the value and type of property, where the decedent lived, and how the property passes. Understanding these rules is important both when planning an estate and when administering one after death.
The estate tax and inheritance tax are different taxes.
New Jersey eliminated its estate tax for individuals who die on or after January 1, 2018. For those decedents, no New Jersey estate tax return is required.
The inheritance tax remains.
An estate tax is generally based on the value of the estate.
An inheritance tax focuses on the transfer to a particular beneficiary. New Jersey looks at the relationship between the decedent and the person or organization receiving the property.
That means a large estate can owe no New Jersey inheritance tax if all property passes to exempt beneficiaries.
A much smaller estate can owe inheritance tax if property passes to taxable beneficiaries.
New Jersey divides beneficiaries into classes.
The beneficiary’s class determines whether the transfer is exempt and, if not, the applicable tax rate.
Where the beneficiary lives generally does not determine whether the New Jersey inheritance tax applies.
Instead, New Jersey focuses on factors such as the decedent’s residence, the type and location of the property, and the beneficiary’s relationship to the decedent.
Class A beneficiaries pay no New Jersey inheritance tax.
Class A generally includes:
A step-grandchild is not treated the same as a stepchild for this purpose.
For many New Jersey families, the Class A exemption means that property passing to a spouse, children, grandchildren, or parents creates no inheritance tax.
That does not necessarily mean that no filing or tax-waiver work will be required.
Class C generally includes:
The first $25,000 passing to each Class C beneficiary is exempt.
The remaining inheritance is taxed under a graduated rate schedule:
The tax is calculated separately for each beneficiary.
Class D includes most beneficiaries who do not fall within Classes A, C, or E.
Examples commonly include:
The Class D rules are significantly less favorable.
If a Class D beneficiary receives $499 or less, no inheritance tax is due.
If the beneficiary receives $500 or more, the entire taxable amount is subject to tax. There is no $500 exemption.
The rates are:
This distinction can produce a large tax when significant property passes to a friend, niece, nephew, or unmarried partner.
Class E generally includes qualifying charitable, religious, educational, medical, and governmental organizations.
Transfers to qualifying Class E beneficiaries are exempt from New Jersey inheritance tax.
This may include certain:
The tax status of a particular organization should be confirmed before relying on the exemption.
When a New Jersey inheritance tax return is required, it generally must be filed within eight months after the date of death.
Any inheritance tax due must also be paid within eight months.
An extension may provide additional time to file the return.
It does not provide additional time to pay the tax.
New Jersey generally charges interest at 10% per year on unpaid inheritance tax after the eight-month deadline.
For that reason, estates with potentially taxable beneficiaries should address the inheritance tax early in the administration rather than waiting until the estate is otherwise ready to close.
The correct form depends on the circumstances.
For a person who died as a New Jersey resident, a required inheritance tax return is generally filed on Form IT-R.
For a person who died as a resident of another state or country, a required New Jersey nonresident inheritance tax return is generally filed on Form IT-NR.
A full inheritance tax return is not required in every estate.
However, tax-waiver forms or other filings may still be needed before certain assets can be transferred.
New Jersey currently requires inheritance and estate tax returns to be filed on paper rather than electronically.
New Jersey imposes a tax lien on certain property when someone dies.
As a result, a bank, brokerage firm, title company, or other institution may require proof that the State’s inheritance tax interest has been satisfied before releasing or transferring property.
This proof is commonly called a tax waiver.
A waiver does not necessarily mean that inheritance tax was actually owed.
It means that the State has authorized the transfer of the particular property.
In qualifying estates involving Class A beneficiaries, an executor or beneficiary may be able to use Form L-8 to release certain bank accounts, stocks, bonds, and brokerage assets without filing a full inheritance tax return.
For New Jersey real estate, Form L-9 may be available in qualifying resident estates to request a real-property tax waiver.
Different rules apply to nonresident decedents who owned New Jersey property.
Tax waivers often become important when an executor tries to sell real estate or transfer financial accounts.
For a person who died as a New Jersey resident, the inheritance tax can potentially apply to many types of property.
That may include:
Whether tax is actually due depends primarily on who receives the property and whether an exemption applies.
The method by which an asset passes can also matter.
Property passing under a will is not the only property that can be relevant. Jointly owned property, payable-on-death accounts, transfer-on-death accounts, retirement benefits, and other assets passing by operation of law may also need to be considered.
New Jersey can impose inheritance tax even when the person who died was not a New Jersey resident.
The rules are much narrower.
For a nonresident decedent, New Jersey generally focuses on property physically connected to New Jersey, particularly New Jersey real estate and certain tangible personal property located here.
Intangible property is generally treated differently.
For example, the fact that a nonresident maintained an investment account with a financial institution doing business in New Jersey does not by itself make the account subject to New Jersey inheritance tax.
A separate Form IT-NR may be required when a nonresident owned taxable New Jersey property.
The analysis therefore begins with the decedent’s legal residence at death, not the beneficiary’s residence.
Different assets can receive different treatment.
Life insurance proceeds paid directly to a named beneficiary are generally exempt from New Jersey inheritance tax.
That does not mean every payment associated with life insurance is automatically exempt. Ownership, beneficiary designations, and whether proceeds are payable to the estate can matter.
Retirement accounts require separate analysis.
An IRA, pension, annuity, or similar account may pass directly to a designated beneficiary rather than under the decedent’s will. The fact that the asset avoids probate does not automatically mean that it avoids inheritance tax.
Estate administration therefore requires looking beyond the probate estate.
Sometimes.
Lifetime gifting and trust planning can reduce future inheritance tax in appropriate circumstances.
But New Jersey has special rules designed to prevent a taxable transfer at death from being converted into a tax-free gift immediately before death.
Transfers made without full consideration during the three years before death may be presumed to have been made in contemplation of death and must be reported.
Transfers made earlier can also create inheritance tax issues when the decedent retained the use, possession, enjoyment, income, or another significant interest in the transferred property.
That means lifetime planning should be done carefully and, when possible, well before a health crisis or anticipated death.
A gift is not automatically outside the inheritance tax merely because legal title changed before death.
Trust planning can also affect the New Jersey inheritance tax.
A trust may benefit several people who fall into different beneficiary classes.
A beneficiary may receive income for life while another person receives the remaining property later.
In those situations, New Jersey may need to determine the value of each taxable interest.
Certain contingent or future interests can require a compromise tax calculation.
The inheritance tax consequences of a trust therefore depend on more than the name of the trust. The beneficiaries, distribution provisions, retained interests, and timing of the transfers all matter.
Assume Jack dies as a New Jersey resident under current law.
His estate consists of:
Jack is divorced.
He has an estranged son, Jordan, and three grandchildren through Jordan.
Jack has lived with his girlfriend, Greta, for ten years. They are not married and are not civil union or qualifying domestic partners.
Jack is also close with his sister, Stacey.
His will provides:
The inheritance tax results are dramatically different for each beneficiary.
Jordan receives nothing under the will.
Jack generally may choose to omit an adult child from his estate plan, subject to any other applicable legal rights or circumstances.
The three grandchildren each receive $10,000.
As Jack’s descendants, they are Class A beneficiaries.
Their gifts are exempt from New Jersey inheritance tax.
Stacey is Jack’s sister.
She is a Class C beneficiary.
She receives $100,000.
The first $25,000 is exempt.
The remaining $75,000 is taxed at 11%.
The New Jersey inheritance tax on Stacey’s gift is therefore:
$8,250.
Greta receives the residue of the estate, assumed here to be $965,000.
Greta and Jack lived together for ten years.
For inheritance tax purposes, the length of their relationship does not make Greta a spouse.
Because she does not qualify for another beneficiary class, she is a Class D beneficiary.
The first $700,000 is taxed at 15%:
$105,000
The remaining $265,000 is taxed at 16%:
$42,400
Total New Jersey inheritance tax attributable to Greta’s inheritance:
$147,400.
The $60,000 gift to the qualifying charity is exempt as a Class E transfer.
The example shows why the identity of the beneficiary can matter as much as the size of the estate.
The same dollar can pass completely tax-free to one beneficiary and be taxed at 15% or 16% when received by another.
New Jersey calculates inheritance tax based on each beneficiary’s transfer.
That does not always answer the separate question of who ultimately bears the economic cost.
A will or trust may contain a tax-allocation provision directing how inheritance and other death taxes should be paid.
If the document does not clearly address the issue, applicable law and the circumstances of the estate may determine how the tax is allocated.
Tax-apportionment language should therefore be reviewed when an estate plan includes taxable Class C or Class D beneficiaries.
Inheritance tax planning begins with identifying who will inherit.
A plan that leaves everything to a spouse and children presents a very different New Jersey tax picture from a plan benefiting siblings, nieces and nephews, friends, caregivers, or an unmarried partner.
Planning opportunities may include:
Tax planning should not drive every estate planning decision.
Sometimes a client knowingly chooses a taxable beneficiary because that person is exactly who the client wants to benefit.
The important point is to understand the tax consequence before finalizing the plan.
New Jersey’s inheritance tax can be easy to overlook.
There may be no tax at all when property passes to a spouse, child, grandchild, parent, or other exempt beneficiary.
The result can change quickly when an estate includes siblings, nieces, nephews, unmarried partners, friends, trusts, or other beneficiaries.
The tax can also affect estate administration long before a return is filed because financial institutions and title companies may require inheritance tax waivers before transferring property.
A careful review should address both sides of the issue:
What tax will the estate plan create?
and
What filings and waivers will be required after death?
The Law Office of Robert Aufseeser advises clients on New Jersey inheritance tax issues in both estate planning and estate administration matters.
This page provides general information about New Jersey inheritance tax and is not intended as legal or tax advice. The application of the tax depends on the facts of each estate and the law in effect at the relevant time.
Last updated: August 2026