New Jersey Inheritance tax

6 Replies

Hey everyone, i need some advice. My father has a few properties in new jersey and he wants to transfer them into my name now to avoid inheritance tax when he passes. From the research I have done I am under the impression children are exempt from inheritance tax in new jersey. Is this accurate? And if he changes ownership while He is alive I would also inherit the capital gain and depreciation recapture. I was hoping some of you experts could help! Thanks everyone

Nick

@NIcholas Hamel

Hi Nicholas!

I'll try to help you out with this. It seems like as a class A beneficiary, you wouldn't be subject to inheritance tax in NJ. Class A beneficiary being a spouse, child, step child, etc. 

The benefit to waiting until he passes to do inherit these properties would seem to be the 'step up' in cost basis - so if he purchase in 1990- the original cost basis is 'stepped up' to the current value (opposed to original value)

The benefit to this would be to if you sold right away, capital gains would be minimal - in opposite fashion to selling later on (post 'step up' cost basis for the year in which it was inherited) after further appreciation. 

To be given the property ahead of time- this step up in the cost basis would go away, keeping the original in place. 

To be given the properties now, it seems likely you would hit a wall, as you would need to make them all (can't really do that with multiple properties) your primary residence for 2 of the 5 years before selling them, to avoid capital gains taxes. 

So to recap, it seems like it might be best to wait until the actual time comes along- but to be very clear it would be most beneficial to speak with an elder law attorney. 

I've got a few attorney here in Indiana that I could connect you with that would be either to able help you or transfer you to professional connections in NJ that would be able to. 

Hope that helps some! 

@Anna Laud

Awesome. Thank you so much anna. Everything you just said is what I suspected but no one seems to believe me lol. Its a bit of a touchy subject and I dont really feel comfortable talking about it with them because I feel like they think im money hungry or something.

@NIcholas Hamel

You're welcome! 

Understandably a sensitive subject, but ultimately you simply want to protect as much of your Father's assets as possible (again, I see your point that even if you're not paying capital gains from your own pocket when/if you sell- at least avoid how much is paid from funds that were inherited from him in time, protecting what he worked to acquire over the years- not money hungry, bottom line smart).

It may be the case then where a neutral third party serving as mediator to facilitate these difficult discussions would be best (elder law attorney), and easily worth the nominal hourly fee to establish a clear picture of the financial reality of the situation. 

I'll send you a DM with some folks here- and if nothing else, someone we work with is bound to have time for a free consult on the matter. 

Nicholas,

@Anna Laud has it all correct, this is of course if our President does not change that, which he has said he wants to. As of right now you are better off letting him hold the property and you Inheriting it for the step up in Basis. If you want to skip Probate court you may want to look into him starting a Family trust and putting the title of the properties under the Family trust, if they are under his personal name, this way what you inherit will not go on public record either, which Probate court does.