Death, Probate and Taxes Why Can’t New Jersey Become More Like New York State on Taxes?

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Estate Planning Attorney

Dying Interstate:

If you die without an estate plan, it is called dying intestate. Your estate will be subject to the intestacy laws of New Jersey and be compelled to go through probate. This means the division and distribution of your estate will be subject to a predetermined statutory formula, usually providing that your estate will pass to your spouse, and in equal portions to your biological children. For many parents in blended families with second or more marriages and unmarried couples, the state’s distribution plan is worlds apart from how they would choose to distribute their assets themselves.

Wills and Death Probate:

If you have a Will but do not have an estate plan, the state will take over at your death to make sure your debts are paid, assets are distributed to your heirs, and any loose ends are taken care of. A Will guarantees that at death your estate will be subject to probate. All property that is controlled by your Will must go through the probate court. A Will does not control distribution of all of your assets and does not take effect until you die so it is no help with lifetime or long-term care planning. Upon your death, your Will becomes a public document, enters the probate process and is in the hands of your executor or executrix.

In some states, the probate process may be long, complicated and costly. Not so in New Jersey. While probate is more streamlined in New Jersey, it still has other disadvantages, like a short term freezing of assets, inventory and appraisal of assets must be made, payment of all debts and other expenses before heirs receive their share, and filing for New Jersey Estate tax waivers.

Exposure to New York State and Federal Estate Taxes:

In addition to the expense and delay of probate, your family may also be liable for estate taxes. Shockingly I must now compare New Jersey to New York since both states are infamous for high taxes, high costs of living, and high everything. That’s why hundreds of thousands of residents have left to go to Florida, The Carolinas and out west. But, on March 31, 2014, the New York State legislature passed a budget that included the biggest changes to the estate tax law in decades. Before this new budget, New York residents who died with estate exceeding $1,000,000 in value were subject to the State’s estate tax.

The new estate tax law, effecting April 1, 2014, increases New York’s basic tax exemption up to the federal level over the next several years. The following chart shows what the New York State estate tax exemption will be in the coming years:


Date of Death  

 

NYS Estate Tax Exemption

 

 

April 1, 2014 – March 31, 2015

 

$2,062,500

 

April 1, 2015 – March 31, 2016

 

$3,125,000

 

April 1, 2016 – March 31, 2017

 

$4,187,500

 

April 1, 2017 – December 31, 2018

 

$5,250,000

 

January 1, 2019 and following  

Equal to Federal Exemption

 

 

There are several pitfalls to look out for with respect to the new law. Significantly, New York State has instituted a three-year look-back for estate tax purposes for any gifts, made after April 1, 2014 and before January 1, 2019, which are larger than the annual gift exclusion amount. Under the previous State law, such gifts were not included in the donor’s estate.

To discuss your NJ Estate matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.