Estate Planning Basics Every New Jersey Resident Should Know

Estate planning is not just for the ultra-wealthy. If you own a home in New Jersey, have retirement accounts, and carry life insurance, your estate may be larger than you think. New Jersey imposes its own estate tax on estates exceeding a certain threshold, making it one of a handful of states with both an estate tax and an inheritance tax.

The New Jersey Estate Tax

New Jersey eliminated its estate tax in 2018, but the state still imposes an inheritance tax. The inheritance tax rate and exemptions depend on the relationship between the deceased and the beneficiary. Spouses, parents, children, and grandchildren (Class A beneficiaries) are exempt. Siblings, sons-in-law, and daughters-in-law (Class C) face rates of 11-16% on amounts over $25,000. Unrelated individuals (Class D) face rates of 15-16%. Federal estate tax applies to estates exceeding the current exemption, which is historically high but could change.

Beneficiary Designations Are Your First Line of Defense

Retirement accounts, life insurance policies, and transfer-on-death registrations pass directly to named beneficiaries and bypass probate entirely. This makes them among the most powerful estate planning tools available. However, outdated designations are one of the most common and costly mistakes we see. A former spouse, deceased parent, or minor child listed as a beneficiary can create significant legal and tax complications.

Core Documents Everyone Needs

• A last will and testament directing the distribution of probate assets
• A durable power of attorney for financial decisions if you become incapacitated
• A healthcare proxy and living will for medical decisions
• A revocable living trust, where appropriate, for privacy and probate avoidance

When to Review Your Plan

Life changes should trigger a review: marriage, divorce, the birth of a child or grandchild, a significant change in assets, or a move to or from New Jersey. At minimum, review your estate plan and beneficiary designations every three to five years. Coordinating with both your financial advisor and estate attorney ensures your investment accounts, insurance, and legal documents all work together.