One aspect of estate planning to consider is the taxes that your heirs will pay upon your death. Taxation can happen at various levels and in multiple ways. You should also plan with taxes in mind.
One tax in New Jersey is the inheritance tax. This is a payment on the transfer of ownership of assets. How much your heirs will owe is not straightforward, which can make planning a little complicated.
Factors to determine the amount
The state will use multiple considerations to determine how much inheritance tax an heir will owe. These include where you lived at the time of your death because the state has resident and non-resident taxation. It also considers the value of the asset, the relationship between you and the heir and the types of assets you owned.
Payment of the tax
Payment of inheritance tax falls on the executor. He or she must pay it within eight months, or it will begin to accrue interest. It is also important for the executor to file the tax form in some cases, even when there is no tax due. The process can be complicated, so in your tax planning process, you may want to go over inheritance tax and all the requirements with your executor to ensure there are no penalties, which would equal losses to your heirs.
It is worth noting that New Jersey also has an estate tax. But your estate will only pay one of these taxes. The state requires only payment of the higher of the two. Make sure your executor also is aware of this point.
