Florham Park counsel Frederick Schoenbrodt was quoted in an article titled, “Your Money: Could New Jersey's Estate Tax Be On The Way Out?", originally published in The Star-Ledger.

In the Q&A article, a New Jersey resident posed the following question: “I recently heard that someone in the state legislature is proposing raising the estate tax deduction from the current $675,000 to the federal level of $5.34 million. This would seriously impact the tax implications on my recently deceased mother’s estate. Is this likely to pass? If so, would it be wise for us to slow down probating her estate until the last possible moment?”

Fred began by explaining that fewer half of the states in the country impose a separate state estate or inheritance tax. Of the states that impose a state estate tax, New Jersey’s estate tax exemption is the lowest, only $675,000.  While many more New Jersey estates may escape the federal estate tax because of recent changes to the federal exemption, many of those estates may nonetheless be subject to state estate tax, given this low exemption.

Regarding the possibility of reform, Fred explained that, "Proposals to raise the state’s estate tax exemption have been made in the past, but to date none have gained the momentum necessary to become law." He explained that the trend nationally has been for states to either eliminate their state estate and inheritance taxes altogether or to raise their exemptions.  New York and Maryland recently joined this trend, each having enacted legislation to significantly increase the amount of their state estate tax exemption over time, he said.   

Fred said that it is the subject of debate among New Jersey trust and estate practitioners about whether these changes to New York’s and Maryland’s estate tax laws increase or decrease the likelihood of an increased exemption in New Jersey.  While no changes to New Jersey’s estate tax exemption appear imminent, he noted that recent experience at both the federal and state levels suggests that momentum for change, even radical change, in this area can build quickly and quietly.

Even if the unexpected occurred and the New Jersey exemption was increased before the estate in question was distributed, it would likely have no effect on the tax consequences attributable to that estate.  In general, those consequences are governed by the law in effect on the date of death, not the date of distribution.  

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