Legal Question in Wills and Trusts in New Jersey

Re: NJ Inheritance/estate tax on house

Yes, as a niece there would be inheritance tax due at the rate of 15% up to $700,000.00 value. Therefore, the tax a $300,000.00 bequest would be $45,000.00. In the absence of instructions to the contrary in the Will, the niece would be responsible for paying her own tax.

Your uncle could transfer the property to his niece now and retain for himself a "life estate" which means he gets the right to exclusive use, ocupancy and enjoyment of the property during his lifetime and then sole ownership would vest in the nieceafter his death.

There may be good reasons not to do this. One is that if he adds his niece to the Deed now, when the day comes that she wants to sell the property, her basis for capital gains tax is her uncle's basis when he bought it. So, for example,if Uncle bought the property for $50,000 thirty years ago and the niece later sells it foe $400,000, there would be a taxable gain of $350,000. If the niece waits and takes ownership through the Will after Uncle dies however, her basis will be the value of the property as of the date of death so if it it's worth $300,000 when uncle dies and sells for $400,000, the taxable gain is only $100,000.

On the other hand, there might be good reasons FOR doing this, mainly related to Medicaid plainnng.

Your Uncle should consult with an attorney who is generally familiar with Elder Law and Probate issues. A mistake here could cost tens of thousands of dollars.

Re: NJ Inheritance/estate tax on house

I agree with Dale, but add some information. If the niece intends to reside in the house, and continues to reside there for 2 years following her uncle's death, she may be eligible for up to $250,000 of profit foregiveness when she sells. If she is married, on a joint return this can go up to $500,000. I make two suggestions: (1) the entire plan be reviewed by a tax attorney, like myself, to verify the niece's plans for the future, so taxes can be estimated and a comparison made of alternatives and (2) the Deed, if the decision is made to put her on the Deed now, is properly and correctly drawn to protect her uncle during his lifetime. There are many reasons, besides income and inheritance taxes, for such a plan to be considered, such as Medicaid planning in the event the uncle becomes incapacitated before his death. Perhaps a trust should be considered, which can also be used to accomplish the same results, and will also avoid probate. As stated above, the entire situation should be discussed with a knowlegable attorney.