If a loved one dies in Canada, and you reside in New Jersey, how do the estate and inheritance taxes work?
nj.com’s recent article asks what happens if “My sister died in Canada. Will I owe inheritances taxes to New Jersey?” The answer: unless the relative owned property in New Jersey, any inheritance would be free of state inheritance taxes.
This is due to the fact that New Jersey has an inheritance tax on the estate of a nonresident for the transfer of real property and tangible personal property located in New Jersey, belonging to the decedent or transferred within three years of death in contemplation of death.
In addition, the transfer of intangible personal property, like bank accounts, stocks, bonds, and annuities, that belong to a nonresident decedent, isn’t subject to New Jersey inheritance tax.
It doesn’t matter where the beneficiary resides, experts say.
Therefore, if the relative had no real or tangible personal property located in New Jersey, there will be no New Jersey inheritance tax owed to New Jersey. If he or she had property located in the Garden State, then the tax will be calculated, based upon the relationship of the beneficiary to the decedent—no matter where the beneficiary lives.
If the relative did own property in New Jersey, waivers must be obtained from the New Jersey Division of Taxation to release the lien for any New Jersey inheritance tax on the decedent's impacted New Jersey property.
If a New Jersey resident is inheriting the property from a sister, he or she is considered a Class C beneficiary and generally subject to tax at a rate of 11-16% on inheritances of greater than $25,000. However, for tax calculation purposes, a ratio of the New Jersey property, compared to the entire estate can be utilized.
In New Jersey, a Form IT-NR would need to be filed (and any tax paid) within eight months of death for a decedent with beneficiaries who are other than Class A, which includes the spouse, civil union or domestic partner, parents, grandparents, descendants or stepchildren of the decedent or charities.
There are no inheritance taxes in Canada. However, the estate could be subject to estate taxes. It’s smart to speak with an attorney there to be certain.
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Reference: nj.com (January 15, 2019) “My sister died in Canada. Will I owe inheritances taxes to New Jersey?”