NJ Inheritance Tax: Who Pays When You Leave Assets to Family and Friends
- Gregory Monaco, CPA
- Dec 27, 2025
- 4 min read
New Jersey inheritance tax is a state tax imposed on beneficiaries who receive assets from a NJ resident's estate, with rates ranging from 11% to 16% depending on the beneficiary's relationship to the deceased. Spouses, children, parents, and grandchildren are completely exempt, while siblings, nieces, nephews, and friends may owe significant taxes.
NJ Inheritance Tax at a Glance
Who Pays: The beneficiary pays based on their relationship to the deceased
What's Taxed: Real property in NJ, tangible personal property, and intangible assets if decedent was a NJ resident
Key Exemptions: Spouses, children, parents, grandchildren (Class A) are fully exempt
Filing Deadline: 8 months after date of death
Estate Tax vs. Inheritance Tax: What's the Difference?
These two taxes are often confused but work very differently. Estate tax is levied on the deceased person's total estate before distribution, while inheritance tax is levied on what each beneficiary receives based on their relationship to the deceased.
Feature | Estate Tax | Inheritance Tax |
Who Pays | The estate (before distribution) | The beneficiary (after receiving assets) |
Based On | Total estate value | Beneficiary's relationship to deceased |
NJ Status | Repealed January 1, 2018 | Still in effect |
Good news: New Jersey eliminated its estate tax effective January 1, 2018. However, the federal estate tax still applies to estates exceeding $13.99 million (2025 exemption), with rates up to 40%.
NJ Inheritance Tax Beneficiary Classes and Rates
New Jersey categorizes beneficiaries into classes based on their relationship to the deceased. Each class has different exemptions and tax rates.
NJ Inheritance Tax Classes and Rates
Class | Beneficiaries | Exemption | Tax Rates |
Class A | Spouse, domestic partner, civil union partner, children, stepchildren, grandchildren, parents, grandparents | Fully exempt | 0% |
Class C | Siblings, son/daughter-in-law (spouse of deceased child) | $25,000 per beneficiary | 11% – 16% |
Class D | Nieces, nephews, friends, cousins, all others | No exemption | 15% – 16% |
Class E | Charities, religious institutions, non-profits | Fully exempt | 0% |
Class C Tax Rate Schedule
For siblings and in-laws, inheritance tax is calculated on a graduated scale after the $25,000 exemption.
Class C Inheritance Tax Rates
Inheritance Amount (After Exemption) | Tax Rate |
First $25,000 | 11% |
$25,001 – $1,100,000 | 13% |
$1,100,001 – $1,400,000 | 14% |
$1,400,001 – $1,700,000 | 15% |
Over $1,700,000 | 16% |
Class D Tax Rate Schedule
Friends, nieces, nephews, and other non-exempt beneficiaries face higher rates with no exemption.
Class D Inheritance Tax Rates
Inheritance Amount | Tax Rate |
First $700,000 | 15% |
Over $700,000 | 16% |
Assets Exempt from NJ Inheritance Tax
Life insurance proceeds paid to a named beneficiary (not the estate)
Assets left to qualified charities
Certain pension and retirement benefits
Assets transferred to Class A beneficiaries
Federal Estate Tax Considerations
While NJ has no estate tax, large estates may still face federal estate tax.
2025 Federal Estate Tax Thresholds
Filing Status | Exemption Amount |
Individual | $13.99 million |
Married couple (with portability) | $27.98 million |
Important: The current federal exemption was scheduled to sunset at the end of 2025, but recent legislation has extended the higher exemption amounts.
Strategies to Minimize NJ Inheritance Tax
For Class C and D Beneficiaries
Lifetime gifting: Annual gifts up to $19,000 (2025) per recipient are not subject to gift tax and remove assets from the estate
Life insurance: Purchase policies payable directly to non-exempt beneficiaries—proceeds are not subject to NJ inheritance tax
Irrevocable trusts: Assets transferred to properly structured trusts may be excluded from the taxable estate
Charitable giving: Bequests to qualified charities are fully exempt
Warning: Gifts made within 3 years of death may be "pulled back" into the estate for NJ inheritance tax purposes.
Filing Requirements and Deadlines
Inheritance tax return (Form IT-R): Due within 8 months of death
Payment: Due within 8 months to avoid interest and penalties
Tax waivers (Form L-8 or L-9): Required to release assets, even for exempt beneficiaries
Consequences of Non-Compliance
Penalties and interest on unpaid balances
Potential liens on real property or estate assets
Delays in transferring inherited assets
Complications during probate process
How Monaco CPA Helps with Inheritance Tax Planning
For Estate Planning
Analyze beneficiaries' tax exposure
Recommend strategies to minimize inheritance tax
Coordinate with estate attorneys on trust structures
Model lifetime gifting strategies
For Estate Administration
Prepare inheritance tax returns (Form IT-R)
Calculate tax due by beneficiary class
Obtain tax waivers for asset distribution
Coordinate with executors and financial institutions
Phone: (862) 320-9554
Email: greg@monacocpa.cpa
Gregory Monaco, CPA, MBA — Livingston, NJ | Serving Essex County and all of New Jersey
Frequently Asked Questions
If I'm a Class A beneficiary, do I still need to file anything?
You may need to file Form L-8 or L-9 to obtain a tax waiver, even though no tax is due. This allows financial institutions to release assets to you.
My partner and I aren't married. Will they owe inheritance tax?
Yes, unless you have a civil union recognized by NJ. Unmarried partners are Class D and face 15-16% tax on everything they inherit.
Does the $25,000 Class C exemption apply per beneficiary or total?
Per beneficiary. Each Class C beneficiary (siblings, in-laws) gets their own $25,000 exemption.
Is there any way to reduce the tax if I'm a Class D beneficiary?
The decedent could have planned during their lifetime through gifting, life insurance, or trusts. Once assets are in the estate, the tax generally applies.
What happens if I can't pay the inheritance tax?
You may need to work with the estate to arrange payment, potentially selling estate assets. Interest accrues after 8 months. Payment plans may be available in hardship cases.
Last updated: December 2025. Tax laws change frequently. Consult with a qualified CPA for advice specific to your situation.
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