NJ Inheritance Tax - Who Pays and Who Doesn’t Pay

NJ Inheritance Tax Infographic

Four Classes of Beneficiaries

New Jersey classifies inheritance beneficiaries into four groups: Class A, Class C, Class D, and Class E. Notably, Class B has been eliminated. Each class is subject to different tax rules:


Class A and Class E – Doesn’t Pay NJ Inheritance Tax

(Decedent’s spouse, parents, children, non-profits, see below for full list)


Class C and Class D – Must Pay NJ Inheritance Tax

(Decedent’s brothers/sisters, nephews/nieces, cousins, friends, significant others, see below for full list)


- Class A: Includes immediate family members such as spouses, domestic or civil partners, children (including stepchildren and adopted children), grandchildren, parents, and grandparents. Class A beneficiaries are exempt from inheritance tax.


- Class C: Comprises siblings and in-laws (sons- or daughters-in-law). The first $25,000 of inheritance is tax-free, with amounts above $25,000 taxed at rates starting at 11% and capping at 16%.


- Class D: Includes all other individuals, such as nieces, nephews, significant others, cousins, and friends. Inheritance is taxed starting at $500, with rates ranging from 15% to a maximum of 16%.


- Class E: Encompasses nonprofits like churches, hospitals, universities, and schools. Class E beneficiaries are fully exempt from inheritance tax.



Examples of Tax Amounts Due

To illustrate the tax implications, let’s create a net estate of $1,025,000 and show how much the same estate would pay if left to a Class A, Class C, Class D and Class E beneficiary.

Widow passes away and has the following assets and debts at time of death:
Real Estate - Residence$600,000
Cash in Banks & Investment Accounts$450,000
Gross Estate – Total Assets$1,050,000
(Mortgages, credit cards, loans, funeral, lawyer, CPA, etc.)
Less Estate Debts/Deductions$25,000
Net Estate Subject to Inheritance Tax$1,025,000
Class A – Widow leaves her entire net estate to her son (or daughter, granddaughter, etc.)
All Class A, no tax is due:
Net Estate Subject to Inheritance Tax$1,025,000
Less: Class A Exemption$1,025,000
Class A – No Tax Due$0
Class C – Widow leaves her entire net estate to her sister (or other Class C heirs)
First $25,000 is exempt. $1,000,000 is taxed at 11%:
Net Estate Subject to Inheritance Tax$1,025,000
Less: Class C Exemption$25,000
Class C – Amount Subject to Tax$1,000,000
Class C Tax Due – 11%$110,000
Class D – Widow leaves her net estate to her niece (or other Class D heirs)
First $700K taxed at 15%, next $325K taxed at 16%:
Net Estate Subject to Inheritance Tax$1,025,000
Class D – First $700K at 15%$105,000
Class D – Next $325K at 16%$52,000
Total Tax Due for Class D$157,000
Class E – Widow leaves her estate to her church, a non-profit, etc.
Class E heirs owe no inheritance tax:
Net Estate Subject to Inheritance Tax$1,025,000
Less: Class E Exemption$1,025,000
Class E – No Tax Due$0

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