march 2003

A recent New Jersey law taxes estates of New Jersey residents which exceed $675,000 where the estate assets do not pass to the surviving spouse

BACKGROUND

Until recently, New Jersey generally followed federal law in granting exemptions against estate taxes. The federal exemption was $675,000 in 2001. For 2002 and 2003 it is increased to $1,000,000 and is scheduled to increase in increments up to $3,500,000 by 2009, with no estate tax in 2010. It then reverts back to $675,000 in 2011 and future years. Despite the increases in the federal exemption, New Jersey's exemption now remains fixed at $675,000.

As a result, estates of residents of New Jersey whose death occurred after December 31, 2001, may now be subject to a New Jersey estate tax even though the same estate is not subject to a federal estate tax.

Assuming a New Jersey resident dies leaving an estate of $1,000,000 to a beneficiary other than a spouse, although there will be no federal estate tax, there will be a New Jersey estate tax of $33,200.

WE RECOMMEND

Your Will should be reviewed as soon as possible to determine if the recent legislation affects you and if so, what strategies may be adopted.

If you have questions concerning the new legislation, please contact Regina E. Schneller.