Florham Park Private Client counsel Fred Schoenbrodt was quoted in “Ask the Biz Brain,” a regular estate and financial planning column in The Star-Ledger newspaper.

In the Q&A article, a New Jersey resident posed the following question: “I live in New Jersey. My aunt, who lived in Connecticut, recently died and left me some money. To which state or states do I owe inheritance tax?”

The answer noted that, typically, the executor of an estate carries most of the burden of administering the estate, while the beneficiary may be less involved. Estate and inheritance taxes are based on where the decedent lived, not where the beneficiaries reside.  In 2014, the Connecticut estate tax exemption is $2 million.

“You won't have to file anything with New Jersey to inherit assets from your aunt's out-of-state estate and you will not owe separate New Jersey inheritance tax,” said Fred.  He explained that “Connecticut has an estate tax, but does not have an inheritance tax, while New Jersey has both.”

“Your question highlights the difference between an estate tax and an inheritance tax. While both taxes apply at a person's death, many people refer to these two taxes interchangeably, but they actually operate in very different ways,” he said.

He explained, “An estate tax is primarily based on the total value of a decedent's estate compared to the state's estate tax exemption amount. By contrast, an inheritance tax is primarily based on the identity of a decedent's beneficiaries, their relationship to the decedent, and the amount passing to certain classes of beneficiaries.” 

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