I want to leave my nephew $200,000.00 in my Will. The rest of my estate would pass to my son. I understand an inheritance tax applies to my nephew but not to my son. How does the tax get paid when I die?
The question as to which part of your estate pays the inheritance tax is your decision and one you should state in your Last Will and Testament. You could require that the residuary estate pay the inheritance tax. This would mean that the tax caused by your nephew's bequest would be deducted from the share of your son’s estate. The other alternative is to deduct the fifteen percent tax from the $200,000.00 gift to the nephew. This would mean he would receive $170,000.00 rather than $200,000.00 ($200,000.00 - $30,000.00).
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Your preference depends upon your goal. If you are intent on your nephew receiving a gross inheritance of $200,000.00, and you believe the rest of your estate can afford to pay his tax, then you would include a directive in your Will that your residuary pay the tax. On the other hand, if you do not want your son’s share to be diminished in any manner, and you believe it is more equitable that your nephew pays the tax, you would want to specify that instruction in your Will.
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In New Jersey if your Will does not contain direction on how the inheritance tax is paid, then the default position is the recipient of the gift, your nephew, pays the tax.
Nicholas Giuditta is a trusts and estates attorney in Westfield. He prepares estate plans for high net worth individuals and regularly represents executors and administrators of estates. Find out how your family can benefit by contacting Mr. Giuditta at 908-232-0099 or visit his website at www.giudittalaw.com.
The questions and answers by Nicholas A. Giuditta, III, of the Law Office of Nicholas A. Giuditta, III, provided herein are for general information purposes only. The information does not, nor is it intended to, constitute legal advice and is not provided in the course of an attorney-client relationship. Online readers should not act upon this information without discussing the particular facts of their matter with an attorney.
