Types of Tax Obligations For Beneficiaries

Representing Beneficiaries of a New Jersey estate

When a person passes, they may leave assets to a person or entity of their choosing. In some cases, a person with an established estate plan will leave money and belongings to a loved one. In some other situations, a person may decide to leave assets to a charitable entity or organization in hopes of supporting a cause posthumous.  The person or entity that inherits under the provisions of a will is called a beneficiary. If a person dies “testate”, the wishes of the deceased are declared in a valid will, including the beneficiaries and what assets will be passed. If a person dies “intestate”, there is no will and New Jersey will set forth the hierarchy of who will inherit assets, starting from the decedent’s closest relatives. An estate can have many beneficiaries and conflicts may arise. If you are a beneficiary of an estate, you should retain the services of an experienced attorney to protect your rights and interests. If you need legal representation as a beneficiary, contact The Radol Law Firm for a consultation to discuss your inheritance.

Tax obligations for beneficiaries

Beneficiaries are broken down into classes with a different tax obligation. Knowing your class according to the law is important to understanding how an inheritance will be handled. The classes are as followed:

  • Class A beneficiaries: Father, mother, grandparents, descendants, spouses, civil union partners or domestic partners
  • Class B beneficiaries: No longer exists. Eliminated on July 1, 1963
  • Class C beneficiaries: Brother, sister, half brother or half sister of the deceased. Spouse, widow, or widower of a child of the deceased.
  • Class D beneficiaries: Everyone else outside of the other classes
  • Class E beneficiary: The State of New Jersey or political subdivision thereof. Class E can also include any educational or religious institution, hospital, social work organization, and any other charitable cause.

For some classes of beneficiaries, the state imposes a Transfer Inheritance Tax ranging from 11% to 16%.

  • Class A: No tax imposed
  • Class C: exempt from tax up to $25,000 of inheritance. Anything that exceeds the initial $25,000 is taxable between 11%-16%, depending greatly on the amount thereafter
  • Class D: exempt from tax on the first $500 dollars but are then taxed between 15%-16% for anything over that amount

Children who become beneficiaries

In some cases, a child becomes a beneficiary of an estate. If a minor is entitled to an inheritance, a guardian or trustee will be appointed to handle any distributions.

When issues arise

There are times when being a beneficiary means fighting for what you know is right. Though The Radol Law Firm believes that litigation is a last resort, protecting your interest in an estate is important and deserves the attention of an effective legal team. The issues that can arise out of an estate include the validity of a testamentary document and the validity of the chosen executor, amongst other issues. If you need a law firm to protect your interests in an estate, our firm is ready to fight for your future.

Contact The Radol Law Firm

The Radol Law Firm is honored to assist beneficiaries with their legal matters regarding estate law. If you have been chosen to be a beneficiary, you should contact an attorney. If you need quality legal representation, contact The Radol Law Firm for a consultation.