Reasons to Leave New Jersey That Have Nothing to do With Reality TV

The following post was written over one year ago. Laws often change and recent case decisions may impact how the law is applied. As such, the information in this article may not be current. We encourage you to contact our firm for information on this particular article and to make sure the analysis is still up-to-date.

As previously discussed on this blog, in addition to the federal estate tax, the State of New Jersey imposes its own estate tax on inpidual estates larger than $675,000.  In client meetings, we spend a lot of time discussing and developing solutions that revolve around the New Jersey estate tax.  At the end of this discussion, clients usually say something along the lines of “isn’t there an easier way?”  My answer is always simple: “yes, you can become a resident of a state without a state estate tax.”  Now, for most people, leaving the state is not an option, but to be a resident of a state for estate tax purposes, you only have to reside in that state for 6 months and 1 day.  So if you’ve ever considered a beach house in Florida or a ski cabin in Colorado, here’s one more incentive to go for it: you won’t have to pay estate taxes to New Jersey or any other state from the list below.  The only caveat here is that you actually have to live in the state in which you are claiming residency for the 6 months and 1 day.  The New Jersey pision of Taxation has gone to great lengths to determine whether a taxpayer was a resident of another state at the time of his or her death, including looking into phone records, electricity bills, airplane tickets and other similar records.

States that do not impose an estate tax as of this writing*:

1. Alabama                  13. ***Kansas               25. North Dakota

2. Alaska                     14. **Kentucky            26. ***Oklahoma

3. Arizona                   15. Louisiana                 27. **Pennsylvania

4. Arkansas                 16. Michigan                 28. South Carolina

5. California                17. Mississippi               29. South Dakota

6. Colorado                 18. Missouri                  30. Texas

7. Florida                     19. Montana                  31. Utah

8. Georgia                   20. **Nebraska             32. Virginia

9. Idaho                       21. Nevada                    33. West Virginia

10. **Indiana              22. New Hampshire      34. Wisconsin

11. ***Illinois             23. New Mexico           35. Wyoming

12. **Iowa                  24. ***North Carolina

* Please be advised that with the future of the federal estate tax uncertain, some states may alter their state estate tax laws once the federal estate tax situation is resolved.

** These states do not collect a state estate tax, but do collect a state “inheritance tax.”

*** Estate taxes in these states were repealed on January 1, 2010 due to the repeal of the federal estate tax and are may return once the federal estate tax uncertainty is resolved.