✅ Class A (Fully Exempt – No Tax)
No inheritance tax is owed if assets go to:
- Spouse / Civil union partner
- Parents / Grandparents
- Children / Stepchildren / Grandchildren
- Adopted children
👉 Tax rate: 0%
⚖️ Class C (Partially Taxed)
Applies to:
- Siblings
- Sons-in-law / Daughters-in-law
Tax structure:
- First $25,000 → exempt
- Next amounts taxed as:
- 11% on next $1.075M
- 13% on next $300K
- 14% on next $300K
- 16% on amounts over that
💰 Class D (Most Heavily Taxed)
Applies to:
- Anyone else (friends, nieces/nephews, cousins, unmarried partners, etc.)
Tax structure:
- First $700 → exempt
- Then:
- 15% up to $700,000
- 16% above $700,000
🚫 Class E (Exempt Entities)
- Charities
- Non-profits
- Religious organizations
👉 Tax rate: 0%
🏛️ 2. Important Notes
- NJ Estate Tax:
👉 Eliminated as of 2018
(Only inheritance tax remains) - Life insurance:
- Usually NOT taxable if paid directly to a named beneficiary
- Real estate in NJ:
- Still subject to NJ inheritance tax, even if the decedent lived elsewhere
- Who pays the tax?
- The beneficiary, not the estate (though the estate often handles payment)
⚠️ Practical Example
If someone leaves:
- $500,000 to a child → ✅ $0 tax
- $500,000 to a sibling → taxed after $25K exemption
- $500,000 to a friend → taxed at ~15%
🧠 Planning Insight (Important)
Because of how steep Class D rates are, many NJ residents:
- Leave assets to Class A beneficiaries when possible
- Use trusts, gifting strategies, or life insurance to reduce exposure
