Real Estate and Estate Planning
Key Considerations for Passing Real Estate
By: Sergio Simoes, Esq. | May 2025
Real Estate is often a significant asset in an individual’s estate, requiring careful consideration when planning for the future. This brochure explores the intersection of real estate and estate planning in New Jersey. Some key factors to consider for passing real estate include New Jersey’s Inheritance Tax, Probate, and Family Dynamics.
New Jersey Inheritance Tax
New Jersey eliminated its Estate Tax for deaths on or after January 1, 2018, but its Inheritance Tax remains effective. This tax is imposed on amounts that a beneficiary receives. The Inheritance Tax puts beneficiaries into 1 of 4 different classes: “A”, “C”, “D”, and “E”. The class in which a beneficiary fits determines whrther an Inheritance Tax is owed.
Class A: EXEMPT. This includes the decedent’s spouse, civil union partner, domestic partner, child/ren (including legally adopted child/ren), mother, father or grandparent/s.
Class C: This includes the decedent’s sibling/s, half-sibling/s, son/s-in-law, daughter/s-in-law, widow of a deceased son, and widower of a deceased daughter. These individuals are taxed as follows: 11% on any amount over $25,000 up to $1,100,000 (no taxes below $25,000), 13% on any amount over $1,100,000 up to $1,400,000, 14% on any amount over $1,400,000 up to $1,700,000 and 16% on any amount over $1,700,00.
Class D: This class includes anyone who is not a Class A, Class C, or Class E beneficiary. This means, a neice, nephew, cousin, fiance, non-civil union or friend. Here, bequests to D beneficiaries are taxed at: 15% on any amount up to $700,000 (unless the bequest is less than $500), and 16% on any amount in excess of $700,000.
Class E: EXEMPT. This class includes gifts to class exempt entities like charities, religious institutions, educational and medical institutions and not-for-profit organizations.
If the Inheritance Tax applies, a return must be filled by the estate’s executor and the tax must be paid within 8 months of decendent’s death.
Probate: Probate can be a complex and time-consuming process. It’s important to plan ahead to minimize the impact of probate on the transfer of real estate.
Family Dynamics: Real estate can be a source of conflict among family members. It’s important to consider how to distribute real estate in a way that is fair and equitable to all heirs.
Strategies for Passing Real Estate:
There are key strategies for transferring real estate to your heirs. A Will clearly states who inherits your property after your death, but goes through probate, which can be time-consuming. Trusts allow you to hold and manage real estate for ebneficiaries, often avoiding probate and offering asset protection, especially for those with unique needs. Lastly, Life Insurance provides immediate cash to your estate, which can be crucial for covering taxes or other expenses that arise when transferring real estate, ensuring a smoother transition.
The intersection of real estate and estate planning is a complex aea of law. It’s important to work with an experienced attorney to develop a plan that meets your individual needs and goals. By working with an attorney, you can ensure that your real estate is passed to the next generation in a way that is fair, equitable, and cost-efficient.
Let Us Help!
The legal team at Sanchez Law can help you to develop an estate plan that meets your individual needs and goals, and to ensure that your estate plan is legally sound. In addition to our probate services, Sanchez Law can support clients with, among other services:
Residential Real Estate Transactions;
Commercial Real Estate Transactions;
Lease Negotiations;
General Business Counsel; and
Business Entity Formation.
To learn more about our services from a member of our team, please contact us today. We look forward to hearing from you.