Estate Tax Will Begin Phase Out on Jan. 1, 2017

By Michael Hill

Margaret Marcucci, president and CEO of Coranet, was among the business owners considering leaving the state — even considering putting her house on the market last year — because New Jersey’s estate tax threshold was so low.

“I do know of other small business owners that have left already and that doesn’t make me happy,” she said.

They abandoned the Garden State for New York or Pennsylvania, or some moved to Florida for half the year and a day to change their residency and avoid paying huge tax bills when their assets were to change hands to relatives or upon death.

That was the driving force to change the law. Right now, New Jersey taxes an estate’s value above $675,000. The threshold goes to two million in January and then disappears in 2018 and goes according to the federal level.

“I am very happy that there is some recognition to try to retain some of our residents,” Marcucci said.

She got the confidence to stay when she sat down for estate planning with her CPA Kathleen Alexander.

Alexander said that, “We had explored moving her business out of state four years ago and at that point when we heard there might be some shift down in Trenton to repeal the estate tax I said to her, ‘Hold on, I think we have some hope.'”

Alexander says Marcucci’s contributions to New Jersey — like other wealthy residents — are too innumerable to lose.

“She is very philanthropic and there are a number of institutions in this state that they give very charitably to and plus their on boards,” Alexander said.

CEO and president of New Jersey Society of CPAs, Ralph Albert Thomas, says, “We want people to stay in New Jersey.”

The NJ Society of CPAs says the Garden State has made it too easy for the wealth to leave the state.

“75 percent of the who responded to our survey said they actually — as part of their state planning or wealth management planning with their clients — that was something that was on the table that suggests that they would leave the state of New Jersey,” Thomas said.

Thomas says he believes the trend of thousands of wealthy residents leaving New Jersey will turn around in a few years.

Estate Planner Jay Freireich does too. He’s advising folks to review and re-evaluate and — in many cases — create their wills.

Freireich said, “Anybody you know in this day and age you know you have a home in New Jersey and your already at that $675,000 where you need to be doing planning and setting up trusts to try to take advantage of both the husband’s exemption and the wife’s exemption. Now it’s going to be $2 million and if you’re young enough to live another year it’s going to be $5 million and a lot of people won’t be having to deal with that anymore.”

The new estate tax law kicks in Jan. 1 but already some Democratic state lawmakers grumble and are plotting to undo the changes. Changes they say that favor the wealthy and would harm the state’s finances. But those who favor the laws say the real harm would be in not making an effort to keep the wealth in New Jersey.