Short answer
It depends on your relationship to the person who died. New Jersey exempts Class A beneficiaries, which include a spouse, children, parents and grandparents. Siblings and other heirs may owe tax. Returns and payment are due within eight months of death. Selling the house does not change who owes inheritance tax.
Who is exempt
The Division of Taxation lists Class A beneficiaries as exempt from inheritance tax. Class A includes the decedent's father, mother, grandparents, spouse or civil union partner, domestic partner, children, adopted children, the descendants of a child, and a stepchild. If you are in that group, you generally owe no inheritance tax on what you receive.
Who may owe
Class C beneficiaries, including siblings and the spouses of children, pay graduated rates after the first $25,000. Class D beneficiaries, a category for all other transferees, pay 15 percent on the first $700,000 and 16 percent above that. Rates and brackets can change, so confirm with the Division or an attorney before you rely on them.
Timing
The executor, administrator or heir-at-law files an inheritance tax return, if required, within eight months of death. If tax is due, payment is also due within eight months. A sale of the house does not reset that clock, so keep it in mind when deciding when to sell. People often confuse inheritance tax with the tax on the sale. Selling the house is a separate event. If you inherit and sell, you may owe income tax on any gain over the value at death, and the inheritance tax is owed by the beneficiary according to class. Keep the two apart in your planning. Ask the executor for the date-of-death value, which is used for both purposes. A tax professional can then tell you what, if anything, you owe on the sale.
A quick example by relationship
Say a house is valued at $300,000 and passes to one person. If that person is a child, a parent, a grandparent or a spouse, the Division of Taxation lists them as Class A and exempt. If the person is a friend or a cousin, that person falls under Class D, and the Division's rate is 15 percent on the first $700,000. On a $300,000 house, 15 percent is $45,000. If the person is a sibling, Class C rates apply. These are illustrations, not tax advice. The value, the share and the class decide the real number, so ask the executor or an estate attorney.
Waivers and the sale
Separate from the tax itself, New Jersey requires a tax waiver to transfer a decedent's real estate. That is true even when no tax is due. Plan on that paperwork when you set a closing date. Kaizen Home Buyers buys New Jersey houses as-is for cash. We make an offer within 24 hours and can close in 14 to 30 days or on your date. Call 267-329-0084.