Early this year, bills A1281 and S1311 were introduced in New Jersey to “eliminate transfer inheritance tax and increase the filing threshold and applicable exclusion amounts under New Jersey estate tax in accordance with provisions of federal tax law.” NJ A397 was also introduced and, if passed, would repeal the New Jersey estate tax.
Forbes Writer Ashlea Ebeling spoke with McManus & Associates Founding Principal John O. McManus about the pending legislation for a recent news story. She starts off her article, “Where Not To Die In 2015,” by relaying a portion of the conversation:
Moving to New York to avoid state death taxes? Really. John McManus, an estate lawyer in New Providence, N.J., has a retired client pulling in $500,000 a year in income, with second homes in Florida and the Hamptons, who is planning to change his residence from New Jersey to his New York house in the Hamptons. Driving the decision: the sweeping changes New York made to its estate tax regime this year.
“When your bordering state is telling you, ‘Come on over!’ the pitch is compelling,” McManus says. “If New York has a more welcoming tax scheme, then people will say, ‘Let’s call me a New York resident.’” McManus says that he and his wife might make the New York move in retirement themselves; they already have a place in the West Village they rent out for now.
Ebeling goes on to explain that several states are “lessening the death tax bite by increasing the amount exempt from the tax, indexing the exemption amount for inflation, and eliminating ‘cliff’ provisions that tax the first dollar of an estate”—and there’s “action afoot in New Jersey to keep up with the pack.”
Will the bills be passed anytime soon? We can’t say with certainty, but it’s unlikely. So far, all three have just been introduced and referred to committees for review (they still have to pass both the Assembly and the Senate) – so that means only about a quarter of the process is complete on each. Also, $760M of the state’s budget comes from estate and inheritance tax. In the context of a $32.5B budget, that is very significant (more than the tax generated on the sale of homes/other real estate in New Jersey).
Check out Ebeling’s article and Forbes’ interactive map for more interesting updates on potential changes to death taxes, state-by-state. And to learn how you can best navigate changes on the horizon, give McManus & Associates a call at 908-898-0100 to review your estate plan.