New Jersey's estate tax applies to the total value of property left behind when someone dies

Estate tax in New Jersey is a state tax on the total value of everything a person owns when they die—their house, bank accounts, investments, vehicles, and personal property. New Jersey is one of only a handful of states that still collects this tax. The tax is paid from the estate itself before money and property go to heirs, which means it reduces what family members actually receive.

The tax only applies if the estate is large enough. New Jersey has a threshold: estates below a certain value owe nothing. The threshold changes yearly and is adjusted for inflation. For 2024, the threshold is $6.94 million. Any estate valued at or below that amount pays no New Jersey estate tax, regardless of how it is distributed.

The person responsible for paying the tax is the executor or administrator of the estate—the person named in the will or appointed by the court to handle the deceased's affairs. They file a return with the New Jersey Division of Taxation and pay from estate funds before distributing anything to heirs.

Key Takeaways

  • New Jersey estate tax applies only to estates worth more than $6.94 million as of 2024, a threshold that increases each year.
  • The tax is paid by the estate's executor using estate funds, which reduces the amount heirs receive.
  • Married couples can combine their thresholds, so a married couple's combined estate can be nearly $13.88 million before estate tax applies.
  • Life insurance proceeds, retirement accounts with named beneficiaries, and property that passes outside the will may still count toward the estate's total value.
  • Federal estate tax is separate from New Jersey estate tax; some estates owe both, while others owe only one or neither.

How the tax rate works once an estate exceeds the threshold

If an estate does exceed the threshold, the tax applies only to the amount above it. The rate is not a flat percentage but a graduated scale—the more the estate is worth above the threshold, the higher the percentage owed. The rates range from 3.5% on the first dollars above the threshold to 16% on the largest estates.

For example, if an estate is worth $7.94 million and the threshold is $6.94 million, only the $1 million above the threshold is taxed. That $1 million would be taxed at the lowest rate, 3.5%, resulting in a tax of $35,000. The first $6.94 million owes nothing.

The executor calculates the tax based on the estate's total value at the time of death. This includes not just bank accounts and real estate, but also the value of life insurance policies, retirement accounts, and any property held jointly with others. Some assets pass directly to heirs outside the will—like accounts with a named beneficiary—but they still count toward the estate's total value for tax purposes.

What counts as part of the estate for tax purposes

The estate includes more than just what is listed in a will. It includes all property the deceased owned or had control over at death. This covers a house, car, bank accounts, stocks, bonds, business interests, and personal items of value like jewelry or art.

It also includes life insurance proceeds if the deceased owned the policy or had any control over it. Retirement accounts like IRAs and 401(k)s count if the deceased was still the owner at death, even though they pass directly to a named beneficiary. Property held as "joint tenants with right of survivorship"—where ownership automatically passes to the surviving owner—counts at full value, not just the deceased's share.

Some assets do not count. Gifts made more than a certain time before death, property left to a surviving spouse, and charitable donations are excluded. The rules around what counts and what does not are detailed, which is why many families work with an estate attorney or tax professional to calculate the estate's true value.

The difference between New Jersey estate tax and federal estate tax

New Jersey estate tax and federal estate tax are two separate taxes. An estate can owe one, both, or neither depending on its size and structure. The federal threshold is much higher than New Jersey's. For 2024, the federal threshold is $13.61 million per person, or $27.22 million for a married couple. This means many estates that owe New Jersey tax do not owe federal tax.

Some large estates owe both taxes. When that happens, the executor pays both the state and federal governments from the same pool of money, which can significantly reduce what heirs receive. Federal tax rates are also graduated and can reach 40% on the largest estates, much higher than New Jersey's top rate of 16%.

The federal threshold is set to drop in 2026 unless Congress changes the law. When it does, more estates will owe federal tax. This is one reason families with substantial assets sometimes plan ahead with an attorney to structure their estate in a way that reduces tax burden.

How married couples can reduce or avoid estate tax

Married couples have an advantage: each spouse has their own threshold. If one spouse dies and leaves everything to the surviving spouse, no estate tax is owed because of the marital deduction—property left to a surviving spouse is not taxed. The surviving spouse then has both thresholds available when they eventually die.

For example, if one spouse dies with a $7 million estate and leaves it all to the surviving spouse, no tax is owed. When the surviving spouse later dies with a $10 million estate of their own, they have access to their own $6.94 million threshold plus the unused threshold from their deceased spouse, for a combined $13.88 million threshold. Only amounts above that are taxed.

This strategy requires proper planning. The surviving spouse must file a return with the state to claim the unused threshold, called portability. Without filing, the unused threshold is lost. An estate attorney can may support the paperwork is filed correctly and on time.

When you need to file a New Jersey estate tax return

An estate tax return must be filed with the New Jersey Division of Taxation if the estate's gross value exceeds the threshold at the time of death. The return is due nine months after death, though an extension can be requested. The executor files the return, not the heirs.

Even if no tax is owed because the estate is below the threshold, some estates still file a return to document that fact and preserve the surviving spouse's unused threshold. This is especially important for married couples, since filing is the only way to claim portability.

The return requires a detailed list of all assets, their values at death, and any deductions or exclusions. Appraisals may be needed for real estate, business interests, or valuable personal property. The executor typically works with an accountant or attorney to gather this information and prepare the return.

How to learn about an estate owes New Jersey estate tax

The first step is to determine the estate's gross value. This means adding up everything the deceased owned: real estate, bank and investment accounts, life insurance, retirement accounts, vehicles, and personal property. For property like a house or business, you may need a professional appraisal to establish its value at the time of death.

Compare that total to the current year's threshold. If the estate is below the threshold, no New Jersey estate tax is owed. If it is above, the amount over the threshold is subject to tax at the graduated rates.

Because the rules are complex—especially around what counts as part of the estate and what deductions explore—most executors work with an estate attorney or tax professional. They can review the estate's structure, identify any assets that might be excluded, and determine the actual tax owed. Many offer a free initial consultation to discuss the estate's situation.

Frequently Asked Questions

Does New Jersey estate tax explore if the person lived out of state?

New Jersey estate tax applies to anyone who owned New Jersey property at death, regardless of where they lived. If the deceased owned a house, business, or other property in New Jersey, the estate may owe tax even if they lived in another state. The tax applies to the value of the New Jersey property, not necessarily the entire estate.

Can life insurance be excluded from the estate to avoid tax?

Life insurance proceeds count toward the estate's total value if the deceased owned the policy or had control over it. However, if the policy is owned by someone else—like a trust or an adult child—the proceeds may not count. This requires setting up the ownership structure before death, which is why some families work with an attorney to plan ahead.

What happens if the executor does not file a return?

The New Jersey Division of Taxation can assess penalties and interest if a required return is not filed. The executor is personally responsible for paying the tax from estate funds. If the executor fails to pay, creditors and heirs may pursue them for the unpaid amount. Filing on time protects the executor and ensures the estate can be closed properly.

Is there a way to reduce the estate's value before death?

Gifts made during life are not counted as part of the estate, which is one reason some people make large gifts to family members or charities before death. However, there are limits on how much can be given away tax-free, and the rules are complex. An estate attorney can discuss strategies that fit a particular situation.

Do heirs have to pay income tax on what they receive?

Heirs generally do not pay income tax on inheritances in New Jersey. The estate itself may owe estate tax, but heirs do not owe income tax on money or property they receive. However, if inherited property later generates income—like rental income or investment gains—that income is taxable to the heir.