An estate tax is a tax paid on the estate of a person who has died. Not all estates are assessed this tax depending on the value of the estate and how a will has been structured. There are many tax aspects to consider in estate planning and elder law whether you are an executor, trustee or beneficiary. If you are any of these participants in the administration of a will, you will want to be aware of tax ramifications and responsibilities so should consider consulting an experienced executor.

A New Jersey estate tax return must be filed if the decedent’s gross estate exceeds $675,000 and it must be filed within nine months of the decedent’s death. Additionally, a copy of any federal estate tax return must be submitted within 30 days of the date it is filed with the federal Internal Revenue Service. Further a copy of any communication received from the Internal Revenue Service in relation to the probate matter must be submitted to the state within 30 days of its receipt.

The value of an estate is determined by adding up all of the assets owned at death, to include:

• Real estate located in New Jersey
• Bank accounts and certificates of deposit
• Investment accounts and securities
• Vehicles and other items of personal property
• Life insurance proceeds
• Retirement accounts
• Small businesses

The amount of a gross estate determines whether or not a tax return must be filed. There are various methods to determine estate valuation. The amount of a taxable estate, which is what is left after subtracting deductions, determines whether or not there will be an estate tax. The most substantial deduction for many people is the marital deduction, which subtracts any amount left to a spouse. For example, if a person leaves all of their property to a spouse, there will be no estate tax. Examples of other deductions include attorney fees, funeral costs, and outstanding income tax bills. If allowed deductions reduce the value of your taxable estate below $675,000, there will be no state estate tax.

Any tax not paid within nine months generally incurs interest at a rate of 10% per year until paid. The Department of the Treasury may extend the time to file the return but not to pay the tax. If a federal estate tax return has or will be filed with the Internal Revenue Service, any election made by a taxpayer to treat an asset in a particular manner for federal estate tax purposes must be treated the same for New Jersey estate tax purposes. In other words, a taxpayer generally may not make one election for federal purposes and another for state purposes. However, there are often exceptions to general rules so it is important if facing complex estate taxation issues to consult an experienced estate tax attorney to become aware of your rights and the best approach to achieve the desired outcome in your individual situation.

If you need assistance with a probate matter, contact Margaret M. Mahon, an experienced estate tax law firm. We offer free 30-minute initial consultations. Our Red Bank office provides free parking and flexible hours for appointments by request. If necessary, we can travel to meet with you.