New Jersey Estate and Inheritance Tax Planning: 2025 Update for High-Net-Worth Families

Understanding the New Jersey estate and inheritance tax system is one of the most common sources of confusion for residents, especially when compared to federal estate taxes. Here’s what you need to know for 2025.

Understanding New Jersey’s Estate vs. Inheritance Tax in 2025

New Jersey Estate Tax (NJET): This tax, which was levied on the total value of a decedent’s estate, was repealed for individuals passing away on or after January 1, 2018. As of 2025, no state-level estate tax applies in New Jersey.

New Jersey Inheritance Tax (NJIT): This tax remains in effect and is critically important. Unlike an estate tax—paid by the estate—the inheritance tax is paid by the beneficiary based on their relationship to the decedent.

• Exempt Beneficiaries (Class A): Spouses, children, grandchildren, and parents are exempt and pay no NJ Inheritance Tax.
• Taxable Beneficiaries (Classes C & D): Relatives such as siblings, nieces, nephews, and friends may owe taxes ranging from 11% to 16% on their inherited share.

This means that even though New Jersey is estate-tax-free, beneficiary designations still require careful planning to prevent unnecessary taxation for certain heirs.

The Federal Estate Tax Game Changer for 2025 and Beyond

The real urgency for high-net-worth estate planning in New Jersey comes from Washington, D.C. The federal estate and gift tax exemption is historically high in 2025—approximately $13.99 million per individual (or nearly $28 million per married couple).

However, this generous exemption—created under the 2017 Tax Cuts and Jobs Act (TCJA)—is scheduled to sunset at the end of 2025.

• If Congress doesn’t act, the exemption will drop to around $7 million per person on January 1, 2026.
• Any estate value over that threshold could face a 40% federal estate tax.

Waiting to see if lawmakers extend the exemption could be an expensive mistake.

Key Strategies for New Jersey Estate and Inheritance Tax Planning

With the sunset date approaching, high-net-worth individuals should act now to secure their legacy. Key steps include:

1. Use Lifetime Gifting Opportunities:

The IRS confirms that gifts made under the current high exemption will not be taxed later if limits drop. Making substantial lifetime gifts in 2025—beyond the $19,000 annual exclusion—locks in today’s benefits.

2. Review and Fund Irrevocable Trusts:

• Irrevocable Life Insurance Trusts (ILITs): Remove life insurance proceeds from your taxable estate to avoid pushing your estate over the federal threshold.
• Charitable Trusts (CRTs): Support causes you care about, receive lifetime income, and reduce your taxable estate.

3. Maximize Portability for Married Couples:

Ensure that your estate plan preserves the unused federal exemption of the first spouse to die through a properly filed federal estate tax return.

Act Now: The 2025 Estate Planning Window Is Closing

The next 12 months represent a historic opportunity for proactive estate and inheritance tax planning in New Jersey. Once the federal exemption is reduced, many estates will face significant new tax exposure.

If your estate exceeds $5 million—or if you simply want to ensure your heirs receive the maximum benefit—now is the time to act.

Schedule a confidential consultation today to review your New Jersey estate and inheritance tax plan before the 2025 exemption sunsets.