NJ Inheritance Tax: Rates, Classes, and Spouse Exemption
New Jersey is one of only a handful of states that still imposes an inheritance tax, and the amount a beneficiary owes depends almost entirely on their relationship to the person who died. Surviving spouses, children, parents, and grandchildren (Class A beneficiaries) owe nothing. Siblings and a child's spouse (Class C) face graduated rates of 11% to 16% after a $25,000 exemption. Everyone else, including friends, cousins, nieces, nephews, and unmarried partners who aren't registered domestic partners, falls into Class D and is taxed at 15% to 16% with no exemption. If you're married, in a civil union, or a registered domestic partner in New Jersey, your surviving partner inherits free of inheritance tax. For everyone else involved in a New Jersey estate, understanding the beneficiary classes, rates, exemptions, and the eight-month filing deadline is the first step toward planning together with clarity.
Key takeaways
- Surviving spouses, domestic partners (after 7/10/2004), civil union partners (after 2/19/2007), parents, grandparents, children, stepchildren, and grandchildren are Class A beneficiaries and pay zero NJ inheritance tax.
- Class C beneficiaries (siblings, a child's spouse or surviving spouse) receive a $25,000 exemption and then pay graduated rates of 11% to 16%.
- Class D beneficiaries (friends, cousins, nieces, nephews, unmarried non-registered partners) pay 15% on the first $700,000 and 16% on amounts above that, with no exemption.
- New Jersey's separate estate tax was eliminated for deaths on or after January 1, 2018, making the inheritance tax the state's primary death tax.
- The inheritance tax return and payment are due within eight months of the date of death, and unpaid tax becomes a 15-year lien on all New Jersey property in the estate.
- Life insurance proceeds paid to a named beneficiary and assets in an irrevocable trust are not subject to NJ inheritance tax.
How much is the New Jersey inheritance tax?
New Jersey's Transfer Inheritance Tax applies to transfers of real and personal property valued at $500 or more to certain beneficiaries, with graduated rates ranging from 11% to 16%. The tax is based on who receives the property and how much each person receives, not on the total size of the estate.
The most important factor is the beneficiary's class. Spouses, children, parents, grandparents, stepchildren, and grandchildren (all Class A) owe nothing. Siblings and a child's spouse or surviving spouse (Class C) pay rates starting at 11% after a $25,000 exemption. Everyone not in Class A, C, or E (the exempt charitable class) falls into Class D and faces the steepest rates: 15% on the first $700,000 and 16% on everything above that.
New Jersey also used to impose a separate estate tax, but that tax was eliminated for estates of decedents who died on or after January 1, 2018. Today, the inheritance tax is the state's primary death-related tax.
NJ inheritance tax beneficiary classes explained
New Jersey groups every person or organization that might inherit into one of four active classes. Your class determines both whether you owe tax and how much. Here is how each class is defined under current NJ law.
Class A (fully exempt, no tax)
- Spouse
- Domestic partner (for transfers after July 10, 2004)
- Civil union partner (for transfers after February 19, 2007)
- Parent or grandparent
- Child (biological, legally adopted, or mutually acknowledged)
- Stepchild of the decedent (but not a step-grandchild or great-step-grandchild)
- Grandchild, great-grandchild, and other lineal descendants of a child
Class C (taxed at graduated rates after a $25,000 exemption)
- Brother or sister (including half-siblings)
- Spouse, civil union partner, or surviving spouse/civil union partner of a child of the decedent
Class D (taxed at the highest rates with no exemption)
- Everyone not included in Class A, C, or E. This covers friends, nieces, nephews, cousins, and unmarried partners who are not registered domestic partners or civil union partners.
Class E (fully exempt)
- Qualified charities, religious institutions, hospitals, educational and medical institutions, non-profit benevolent or scientific organizations, and the State of New Jersey or its political subdivisions.
Class B was eliminated by statute effective July 1, 1963, and is no longer used.
NJ inheritance tax rates by class (with table)
The inheritance tax is graduated, meaning different portions of an inheritance are taxed at different rates. Rates apply per beneficiary, not to the estate as a whole. The table below reflects the current rate schedule published by the NJ Division of Taxation.
| Beneficiary Class | Portion of Inheritance | Tax Rate |
|---|---|---|
| Class A | All amounts | 0% (exempt) |
| Class C | First $25,000 | 0% (exempt) |
| Class C | $25,001 to $1,100,000 | 11% |
| Class C | $1,100,001 to $1,400,000 | 13% |
| Class C | $1,400,001 to $1,700,000 | 14% |
| Class C | Over $1,700,000 | 16% |
| Class D | First $700,000 | 15% |
| Class D | Over $700,000 | 16% |
| Class E | All amounts | 0% (exempt) |
A quick example: if a sibling (Class C) inherits $500,000, the first $25,000 is exempt and the remaining $475,000 is taxed at 11%, producing a tax of $52,250. If a friend (Class D) inherits the same $500,000, the entire amount is taxed at 15%, producing a tax of $75,000.
Is a spouse exempt from NJ inheritance tax?
Yes. A surviving spouse is fully exempt as a Class A beneficiary and owes zero inheritance tax regardless of the amount inherited. The same exemption applies to a surviving civil union partner (for deaths after February 19, 2007) and a surviving domestic partner (for deaths after July 10, 2004).
New Jersey law also provides that real and personal property held by a husband and wife as "tenants by the entirety" passes to the surviving spouse free of inheritance tax. This is a common way couples hold their home in New Jersey, and it means the house transfers automatically without triggering the tax.
Historically, New Jersey did tax spousal transfers at graduated rates of 2% to 16%. That spousal rate schedule was eliminated for transfers made on or after January 1, 1985. Spouses have been fully exempt for four decades.
What is exempt and how the transfer inheritance tax is filed
Several categories of property are exempt from the NJ inheritance tax beyond the Class A and Class E exemptions:
- Life insurance proceeds paid to a named beneficiary are not subject to inheritance tax.
- Irrevocable trust proceeds are generally not subject to inheritance tax.
- Intangible personal property (stocks, bonds, bank deposits, mortgages) owned by a nonresident decedent is exempt.
- Wrongful death recoveries under the New Jersey Death Act are exempt, with limited exceptions.
Filing deadlines and the 15-year lien
The inheritance tax return must be filed, and the tax paid, within eight months after the date of death. A return is required whenever any tax is due or when property passes to someone other than a Class A beneficiary.
If the tax is not paid, it becomes a lien on all New Jersey property in the estate for 15 years from the date of death. The lien remains until the tax is satisfied or the 15-year period expires.
Resident vs. nonresident returns
If the decedent was a New Jersey resident, their entire estate (including intangible property like stocks) can be subject to inheritance tax depending on who inherits it. If the decedent was a nonresident, only real estate and tangible personal property located in New Jersey is subject to the tax. Nonresident estates use a separate inheritance tax return.
The waiver process
Before certain inherited property can be transferred (bank accounts, brokerage accounts, real estate), the estate typically needs a tax waiver from the NJ Division of Taxation. For Class A beneficiaries, obtaining a waiver is straightforward because no tax is owed. For other classes, the waiver is issued once the tax is paid or arrangements are made.
How couples can plan for a New Jersey inheritance
Because spouses and registered partners are fully exempt from NJ inheritance tax, the most direct planning step for couples is making sure their legal status is clearly established. Marriage, a civil union, or a registered domestic partnership places the surviving partner in Class A, eliminating any inheritance tax on transfers between them.
Beyond spousal transfers, how a couple structures bequests to other family members and friends can have a meaningful impact on the total tax paid by the estate's beneficiaries.
Beneficiary class awareness
Naming lineal heirs (children, grandchildren) as primary beneficiaries keeps those transfers in Class A and tax-free. Leaving significant bequests to siblings moves money into Class C (11% to 16% after $25,000), and leaving assets to friends, nieces, nephews, or an unmarried partner who is not a registered domestic partner places those transfers in Class D (15% to 16% with no exemption). Understanding these distinctions helps couples make informed decisions when drafting wills or updating beneficiary designations.
Tools that fall outside inheritance tax
Life insurance payable to a named beneficiary is not subject to New Jersey inheritance tax. For couples who want to leave money to Class C or D beneficiaries, a life insurance policy naming those individuals directly can be a tax-efficient alternative. Similarly, assets placed in a properly structured irrevocable trust are generally outside the reach of the inheritance tax.
Pending legislation
New Jersey Senate Bill S874 has been introduced to exempt all transfers to lineal relatives from the inheritance tax. If enacted, this could expand the existing Class A exemption. The bill has not been signed into law as of this writing, but it signals ongoing legislative interest in reducing the inheritance tax burden.
When to work with a professional
For larger estates, blended families, or unmarried partners who would otherwise fall into Class D, working with an estate planning attorney or tax professional is the most reliable way to evaluate your options. A qualified professional can help you coordinate wills, trusts, beneficiary designations, and insurance policies so that your plan reflects your goals and minimizes the tax your beneficiaries will owe.
Frequently asked questions
Does New Jersey have both an inheritance tax and an estate tax?
New Jersey still has an inheritance tax, but the separate estate tax was eliminated for estates of individuals who died on or after January 1, 2018. For current deaths, the inheritance tax is the state's only death-related tax. The inheritance tax is based on who receives the assets and how much each beneficiary gets, rather than the total estate size.
Do children and grandchildren pay NJ inheritance tax?
No. Children (biological, adopted, or mutually acknowledged), stepchildren, grandchildren, and other lineal descendants of a child are all Class A beneficiaries and are fully exempt from the New Jersey inheritance tax regardless of how much they inherit.
Are unmarried partners taxed on an inheritance in New Jersey?
It depends on their legal status. Registered domestic partners (for deaths after July 10, 2004) and civil union partners (for deaths after February 19, 2007) are Class A beneficiaries and pay nothing. Unmarried partners who are not registered as domestic partners or civil union partners are classified as Class D beneficiaries and pay 15% on the first $700,000 and 16% on amounts above that.
Is life insurance subject to NJ inheritance tax?
No. Life insurance proceeds paid to a named beneficiary are exempt from the New Jersey inheritance tax. This makes life insurance a commonly used tool for passing money to Class C or Class D beneficiaries without triggering the tax.
When is the NJ inheritance tax return due?
The inheritance tax return must be filed and the tax paid within eight months after the date of death. A return is required whenever any tax is due or when property passes to someone other than a Class A beneficiary.
What happens if the inheritance tax is not paid?
Unpaid inheritance tax becomes a lien on all New Jersey property in the estate. The lien lasts for 15 years from the date of death unless the tax is paid before that period expires. Property transfers may also be held up because the NJ Division of Taxation typically requires a tax waiver before bank accounts, brokerage accounts, or real estate can be released.
Do siblings pay inheritance tax in New Jersey?
Yes. Brothers and sisters of the decedent (including half-siblings) are Class C beneficiaries. They receive a $25,000 exemption and then pay graduated rates starting at 11% and reaching 16% on amounts over $1,700,000.
Does the NJ inheritance tax apply to nonresidents?
It can. If a nonresident owned real estate or tangible personal property located in New Jersey, those assets are subject to the inheritance tax based on the beneficiary's class. However, intangible personal property (stocks, bonds, bank deposits) owned by a nonresident is exempt from the New Jersey inheritance tax.
How does New Jersey compare to other states with an inheritance tax?
New Jersey is one of six states that impose an inheritance tax, alongside Pennsylvania, Kentucky, Nebraska, Iowa (which is phasing out its tax), and Maryland. Maryland is the only state that imposes both an inheritance tax and an estate tax. New Jersey's graduated rates of 11% to 16% and its Class A full exemption for close relatives are broadly similar in structure to other inheritance tax states, though the specific rates, exemptions, and beneficiary classes differ by state.
Written by
Ronke Oyekunle
Co-Founder & COO, Neptune
Reviewed by
Michael Cotugno, Esq.
Managing Partner, Neptune Legal · 30+ years practicing family law
Michael has been practicing family law for more than 30 years and as Managing Partner of Neptune Legal, he is widely recognized for his expertise in premarital agreements and estate plans. After spending the first two decades of his career handling family law litigation, he saw firsthand the emotional and financial costs couples often face when issues are not clearly addressed early on. This experience led him to focus his practice on helping clients proactively create thoughtful, well-structured agreements.