New Jersey is one of the few states that still imposes an inheritance tax. In that state, the inheritance tax isn’t based on the size of the estate. It depends on who receives the estate, says NJ.com in its recent post, “Will domestic partner owe inheritance taxes?”
In the Garden State, there are different classes of beneficiaries. Each class is given different treatment for inheritance tax purposes.
First, there’s no inheritance tax imposed on transfers to Class 'A' beneficiaries. This group includes a parent, grandparent, spouse, child or step-child.
Because of the New Jersey Domestic Partnership Act that was enacted in 2003, domestic partners are also now included as Class 'A' beneficiaries who are exempt from inheritance tax (for any partners who die on or after July 10, 2004).
The Domestic Partnership Act also allows same sex couples to register as domestic partners in New Jersey.
The Act also lets opposite sex couples who are at least 62 years of age to register as domestic partners. What is required for this registration is meeting the established legal requirements and having a local registrar issue what is called a “Certificate of Domestic Partnership.”
This inheritance tax exemption works, even if the domestic partnership was entered in another state or DC.
Documentation of the domestic partnership is important to avoid the inheritance tax because common law marriage is not recognized in the state.
Under the laws of New Jersey, it can be an unwelcome surprise to the survivor of an unmarried couple in a long-term relationship, if they didn’t qualify or register as a domestic partner. The bequest that he or she receives from their partner, will then be subject to an inheritance tax at a rate of 15%.
Reference: NJ.com (August 28, 2017) “Will domestic partner owe inheritance taxes?”