Accuracy in Media

The old saying that there are only two things you can’t count on in life are death and taxes has never been more appropriate than in New Jersey.  Thanks to a 2001 change in the federal law pertaining to estate tax exemptions New Jersey stood to lose millions of dollars in tax revenue if they continued to tie their taxes to the federal rates.  So they along with 16 other states decided to collect taxes based on the old rates despite the fact that state law specifically tied the rates to the feds.  To correct this the legislature passed a new law making the old rates legal in July 2002 and made it retroactive to January 1st of that year.  In the meantime people continued to die and were assessed taxes at the new old rates.  One family sued and won with the judge calling a tax on someone already dead a “manifest injustice.”  No kidding.  You die under one set of laws only to have your heirs find out that the laws were changed retroactively so the state could collect more money.  Incredible!

I can’t say that I am totally surprised.  Many years ago AIM had to file an annual report with the state of New Jersey.  We received an extension as our audit wasn’‘t finished by the original deadline.  When we did file and pay the fee we found out a law had been passed that upped the fee by a factor of 10 and that since we filed after the law went into effect we owed the new fee.  We received no sympathy when we complained and I guess we shouldn’t have either since we don’t vote and New Jersey never met a tax it couldn’t hike.

The most important lesson we can all learn from this tax grab though is to pay attention to the death tax rates in your state.  This decoupling of rates is significant and could leave your heirs with far less money than you anticipated if you don’t.




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