New Jersey Inheritance tax

[NIcholas Hamel]

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

[Anna Laud]

@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!