I was having lunch with a client who had recently attended a funeral in Greenwich, Connecticut and had commented about how run down the facilities were.  For those of you who are unfamiliar with Greenwich, it consistently shows up in the lists of “Wealthiest Towns/Neighborhoods in the Country.”[1] [2]

I wondered aloud why a town with such wealthy residents had such modest funeral homes.  My question was quickly answered with the punchline that, of course, “no one dies in Greenwich.”

I immediately understood where my client, a former resident of Connecticut who now resides in Florida, was coming from.  Wealthy individuals have long fled the Mid-Atlantic region (NJ, NY, CT) after retirement in search of warmer climates, lower income taxes, and more favorable state estate tax rates.  While New Jersey isn’t going to replicate the tropical climate of Florida anytime soon, it took the first step towards becoming a more attractive destination for wealthy individuals to pass away, starting in 2017.

The New Jersey gift and estate tax exclusion has remained at $675,000 as the federal exclusion has climbed from $675,000 (in 2000) to $5,450,000 (in 2016).  Not only has New Jersey remained one of the fourteen states to impose a state estate or inheritance tax, it has the lowest exemption amount ($675,000) and the highest marginal estate tax bracket (16% on amounts exceeding $10,040,000) making it one of the least attractive states for the ultra-wealthy.

Governor Christie and the New Jersey Senate reached a compromise in late September, to phase out the New Jersey estate tax beginning in 2017 ($2,000,000 exemption) and eliminate it altogether in 2018.  If you haven’t heard much about this yet – don’t worry, as it was largely buried in the news by the gas-tax hike of $0.23 per gallon and the reduction of the state-wide sales tax from 7.0% to 6.625%.

While the sales and gas taxes will affect a large number of New Jersey residents, the reduction of the estate tax may help sway some of the state’s wealthier individuals from heading south for warmer climates and tax relief.  Although the elimination of the estate tax will reduce tax dollars for the state, lawmakers hope wealthy residents will remain New Jersey residents later in life, increasing income tax revenues.

Other provisions in the legislation include an increase of the Earned Income Tax Credit for low-income workers (which increases to match the federal level of 35%), an income tax exemption for veterans, and a proposal for cuts on income taxes for retirees with incomes under $100,000 to be phased-in over the next five years.[3]

So while the increase in the gas tax may hurt at the pump, New Jersey lawmakers have taken steps to help retain wealthy residents – now if only they could do something about that snow…

[1] http://www.businessinsider.com/richest-neighborhoods-in-america-2014-2#16-round-hill-north-greenwich-in-greenwich-conn-10 

[2] http://www.businessinsider.com/richest-neighborhoods-in-america-2014-2#1-the-golden-triangle-in-greenwich-conn-25

[3] http://www.nj.com/politics/index.ssf/2016/10/7_things_to_know_about_njs_23-cent_gas_tax_hike_de.html

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