Nothing is certain in life, they say, but death and taxes.
And in New Jersey, death and taxes go together. But it looks as if dying in New Jersey may be a little less “taxing” in the future.
We live in one of the few states in the country that still have an estate tax on estates of less than $1,000,000. To give some perspective, at the federal level, when you die, you can leave up to $5 million ($10 million for married couples) to your heirs with ZERO estate tax. Needless to say, very few people are subject to estate taxes from Uncle Sam.
But in New Jersey, estates are taxed over $650,000. When you think about it, that’s very little in a state where the median home price is probably about $450,000. You die with a paid off home, a few personal belongings, and a small IRA balance and you start paying death taxes.
Worse than the tax itself is the bureaucratic nightmare of just dealing with the estate tax. Estate tax waivers are needed before an estate can sell property. It can take months to get these waivers back from the state. Delays often lead to liquidity problems – the house can’t be sold without the tax waiver, but the estate needs the money from the house to pay for taxes and upkeep, etc. Settling an estate and distributing assets can be drawn out over a year or more, largely due to the state of New Jersey and its estate tax regime.
Anyway – apparently this may soon be in our past. I am reading just now that Governor Christie and the Democratic legislature have reached agreement on a new tax regime. Headlines are all about an increase in our gas tax, and yes, I guess we will soon see gas prices go up by 23 cents a gallon. And these will be at least partially offset by a reduction in the general sales tax. But another item in this agreement (and this is the first I’ve heard of this) is the phasing out of the estate tax.
If true, this is a big deal for older New Jerseyans – and their kids. Anyone who has tried to settle an estate will tell you what a bitch the estate tax return can be. I have to agree with Governor Christie – the estate tax is bad for the state economy. Why? Because it is just one more tax that falls heavily on seniors (well, ok, they are dead, but still…). And high taxes is one of the biggest reasons our seniors are flocking to other states. Now, if they can do something about property taxes, we’ll be well on our way to making New Jersey into a retirement mecca.