News of the expected phase-out of New Jersey's estate tax
— along with changes to federal estate tax laws in
recent years — means that many New Jersey residents
should consider simplifying their estate planning documents to
eliminate outdated provisions designed to save state and federal
Mandatory trust provisions, for example, may no longer be needed
to save estate taxes. We recommend that clients review existing
wills and trusts with their attorney to determine whether they need
to be updated in light of these recent tax law changes.
The death of the death tax is part of a larger tax reform
package. On October 7, 2016, the New Jersey State Senate and
Assembly passed a package of tax revisions, which the Governor is
expected to sign soon, as a prerequisite to renewal of the
Transportation Trust Fund.
This bi-partisan compromise consists of a 23-cent gas tax
increase offset by certain tax cuts summarized below.
Estate Tax Phase-Out
Since 2001, New Jersey has imposed an estate tax in addition to
a state inheritance tax. The estate tax applies to estates with
assets of $675,000 or more. The new legislation raises the filing
threshold to $2 million beginning January 1, 2017, and the estate
tax is eliminated entirely as of January 1, 2018.
Effective November 1, 2016, New Jersey will go from having
one of the lowest fuel surcharges in the nation (14.5 cents per
gallon) to one of the highest (37.5 cents per gallon). This 23-cent
increase more than doubles the current rate and puts the state
above the national average. Revenue from gas tax increases will be
used to fund construction projects on New Jersey roads, bridges and
The statute provides for a two-year decrease in state sales tax.
As of January 1, 2017, the 7 percent state sales tax will be
reduced to 6.875 percent. On January 1, 2018, it will be reduced to
Earned Income Credit
The Earned Income Credit for low-income workers will rise from 30
percent of the federal level to 35 percent. Eligibility for this
credit depends on the income of the individual and the number of
Tax Break on Retirement Income
Over four years beginning on January 1, 2017, the current
exclusions from income tax on retirement income will increase as
Veterans who were honorably discharged from active service in the
military or the National Guard will receive a state income tax
exemption of $3,000 per tax year.
New Jersey residents can breathe a collective sigh of relief
that effective January 1, 2018, an estate may be left to one's
spouse, children or grandchildren free of state death taxes.
However, we recommend that our clients review their estate planning
to assure both that their documents are appropriate in light of the
new legislation and that they incorporate flexibility to
accommodate future changes in the law.
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On October 14, Gov. Christie signed a new law that will remove New Jersey from the top of the list as one of the worst states in which to die, and that may give pause to many New Jersey residents seeking to establish their domicile elsewhere.
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