In New Jersey, a fair amount of estate planning has to do with avoiding paying estate taxes. We are more concerned about it here than in other states because residents of New Jersey start paying estate taxes if their estate is more than $675,000. How do you calculate the amount of your estate?
Your estate is the value of everything you own at the time that you die. That includes your bank accounts, any mutual funds, stocks and bonds that you own, the value of your home and all other real estate, your interest in a business, 401K and IRA accounts, life insurance proceeds, your art collection. If you own anything jointly with someone, you include your portion of the joint asset.
You can then deduct the liabilities and allowable deductions of the estate. This includes the cost of your funeral (it must be paid from the estate’s assets), the mortgage on your real estate, any other debts that you owe, charitable gifts, and any bequests to your spouse (only if your spouse is a U.S. citizen).
If your taxable estate is over $675,000, then it must pay New Jersey estate taxes. The estate pays the tax before it is distributed to your heirs. Your estate may be liable for state estate taxes even if your estate does not owe federal estate taxes.
