Short answer
Siblings are Class C and pay 11 percent on amounts above a $25,000 exemption, up to the next bracket. Nieces, nephews and friends are Class D and pay 15 percent on the first $700,000, then 16 percent. Spouses, children, grandchildren and parents are exempt. Your attorney should run the exact numbers.
Who is in which class
The Division of Taxation's executor guide says surviving spouses, parents, children and grandchildren are Class A and exempt from inheritance tax. Brothers, sisters and children-in-law are Class C. Nieces, nephews, aunts, uncles, friends and non-relatives are Class D. Charitable institutions are Class E and exempt. The state's non-resident instructions add that half-siblings count as Class C and that stepchildren are Class A, while their children are Class D. Ask the attorney which class each heir falls into.
The Class C rates
The Division's rate page shows no tax on the first $25,000 for Class C. The next $1,075,000 is taxed at 11 percent, the next $300,000 at 13 percent, the next $300,000 at 14 percent, and anything over $1,700,000 at 16 percent. As a rough illustration, if a sister is the only heir and inherits a house valued at $400,000 on the date of death, the taxable part is $375,000 after the $25,000 exemption. At 11 percent, that comes to $41,250. Debts, deductions and other assets can change the real figure.
The Class D rates
For Class D beneficiaries, the Division lists 15 percent on the first $700,000 and 16 percent above $700,000. Using the same $400,000 example, a nephew or friend would be taxed at 15 percent, which is $60,000 on the house alone. There is no $25,000 exemption in the Class D schedule on that page. Tax is figured on each beneficiary's share, so a house split among several people can produce several smaller calculations.
Value as of the date of death
The executor guide says that when filing any inheritance tax return, the fair market value of the decedent's assets should be reported as of the date of death, not the filing date. That means the sale price a few months later does not set the tax, although a real sale price is useful evidence of value. Ask the estate attorney whether an appraisal is needed, and who will pay the tax if the house is sold before it is paid.
Planning the sale around the tax
If heirs owe tax, a quick sale can make cash available to pay it by the due date. Kaizen Home Buyers makes cash offers on New Jersey houses as-is, with no repairs and no agent commission. We can give an offer within 24 hours and close in 14 to 30 days or on the date the estate sets. Call 267-329-0084. We are not tax advisors, so ask your estate attorney or a tax professional to confirm the amount before you decide how to sell.