NJ Inheritance Tax Explained: Who Pays, Who Is Exempt, and How to Plan

New Jersey repealed its estate tax in 2018, yet the state still collects an inheritance tax, and the two get confused constantly. Whether your heirs owe anything depends on their relationship to you. A spouse or child inherits tax-free, while a niece or a friend can owe 15 percent or more, so what you decide now changes what your family keeps later.

Does New Jersey have an estate tax or an inheritance tax?

New Jersey charges no estate tax on deaths on or after January 1, 2018, but its inheritance tax, on the books since 1892, still applies. The difference matters. An estate tax is charged to the estate itself based on its total size. An inheritance tax is charged on what each beneficiary receives, at rates set by that person’s relationship to the one who died.

New Jersey is one of five states that still collect an inheritance tax. The federal estate tax reaches only estates above $15 million per person in 2026, so most New Jersey families will never pay it. The inheritance tax has no such floor. A $50,000 bequest to a friend is taxed at 15 percent from the first dollar, while the same bequest to a daughter passes tax-free.

Who pays NJ inheritance tax? The beneficiary classes

New Jersey sorts heirs into beneficiary classes, and the class sets the rate:

• Class A: spouses, civil union and domestic partners, children, stepchildren, grandchildren, parents and grandparents. Fully exempt, no matter the amount.
• Class C: siblings of the deceased, plus sons- and daughters-in-law. The first $25,000 is exempt; above that, rates run from 11 percent to 16 percent on amounts over $1.7 million.
• Class D: everyone else, including nieces, nephews, cousins, friends and unmarried partners. The rate is 15 percent on the first $700,000 and 16 percent above it, with no exemption once a transfer reaches $500.
• Class E: qualified charities, religious institutions and New Jersey government bodies. Fully exempt.

Two facts executors ask about most: life insurance paid directly to a named beneficiary is exempt in every class, and the inheritance tax return is due eight months after the date of death, with interest charged on late payments.

Estate tax planning moves to make before December 31

The practical deadline for this year’s estate tax planning is December 31, when the annual gifting window closes. In 2026 you can give up to $19,000 per recipient without filing a federal gift tax return. Lifetime gifts to a sibling or a nephew can reduce what later passes through the inheritance tax, but the timing rules are strict.

New Jersey can tax gifts made within three years of death as if they had passed at death, under its “in contemplation of death” rule. That rule is the strongest argument for starting early.

A short estate planning checklist for New Jersey families: review who your will and beneficiary designations actually name, and which class each person falls in; check how accounts and real estate are titled; confirm whether a trust needs its own trust tax return; and project what each heir would owe under today’s rates.

How RRBB’s New Jersey advisors help with NJ inheritance tax planning

Your estate attorney drafts the will and the trusts. RRBB advisors handle the numbers that make the plan work: projecting inheritance tax by beneficiary class, preparing estate and trust tax filings, and coordinating year-end gifts with your income tax picture. Our estate planning and trust support and estate and trust tax teams work both sides of that line all year.

RRBB has guided families from its Somerset and Union offices for more than 60 years and serves clients across New Jersey, New York and Maryland. As an independent member of PrimeGlobal, the firm offers the expertise of a large firm while still serving clients with personal attention. Because inheritance planning rarely stands alone, our advisors also connect it with retirement and financial planning and, when a parent’s finances are part of the picture, elder care services.

Does New Jersey have an inheritance tax?

Yes. New Jersey taxes transfers from a deceased person to beneficiaries outside its exempt classes at rates from 11 to 16 percent, and the return is due eight months after the date of death.

What is the difference between estate tax and inheritance tax in New Jersey?

An estate tax is paid by the estate based on its size; an inheritance tax is paid on what each beneficiary receives, based on relationship. New Jersey repealed its estate tax for deaths on or after January 1, 2018 and kept the inheritance tax.

Who is exempt from New Jersey inheritance tax?

Class A beneficiaries: spouses, civil union and domestic partners, children, stepchildren, grandchildren, parents and grandparents, along with Class E charities. Life insurance paid to a named beneficiary is also exempt.

How can a CPA help with estate and trust planning in NJ?

A CPA projects what each heir would owe by beneficiary class, prepares estate and trust tax returns, and coordinates gifts and asset titling with your broader tax picture, working alongside the attorney who drafts the documents.

If you are settling an estate now, or deciding what your own plan should look like before year-end, the numbers are easier to face with help. Contact our RRBB advisors at (908) 231-1000 or through rrbb.com/contact to talk through your situation.