Estate Planning Basics for New Jersey Residents

Estate planning is something most people know they should do but often put off. According to a 2024 Caring.com survey, fewer than one-third of American adults have an estate plan in place. For New Jersey residents, the stakes are higher than in many other states because of the state’s inheritance tax, which applies regardless of the size of your estate.

An estate plan is not just about distributing assets after death. It is about making sure your wishes are carried out if you become incapacitated, minimizing the tax and legal burden on your family, and avoiding the delays and costs of probate where possible.

This guide covers the core documents, New Jersey-specific considerations, and how estate planning connects to your broader retirement plan.

The Core Estate Planning Documents

1. Last Will and Testament

A will names who receives your assets, who serves as executor, and (critically for parents and grandparents) who serves as guardian for minor children. In New Jersey, a valid will must be signed by you and witnessed by at least two people. Without a will, your assets pass according to New Jersey intestacy laws, which may not match your wishes.

2. Revocable Living Trust

A revocable trust allows you to transfer assets into a trust during your lifetime, naming yourself as trustee and a successor trustee to manage assets if you become incapacitated or after your death. Assets held in a trust avoid probate, which in New Jersey can take six months to a year or more. Trusts also provide privacy, since probate proceedings are public record but trust distributions are not.

Not everyone needs a trust. If your assets are relatively simple and your beneficiary designations are up to date, a well-drafted will may be sufficient. However, trusts are often valuable for people with real estate in multiple states, blended family situations, or a desire to manage how and when beneficiaries receive their inheritance.

3. Financial Power of Attorney

A durable financial power of attorney authorizes someone you choose (your “agent”) to manage your financial affairs if you are unable to do so. This includes paying bills, managing investments, filing taxes, and handling real estate transactions. Without this document, your family would need to go through a court-supervised guardianship proceeding to manage your finances, which can be costly and time-consuming.

4. Healthcare Power of Attorney (Healthcare Proxy)

This document designates someone to make medical decisions on your behalf if you cannot communicate your own wishes. In New Jersey, this person is called your healthcare representative. Choose someone who understands your values and is willing to advocate for your preferences.

5. Living Will (Advance Directive)

A living will spells out your preferences for end-of-life medical treatment, including life-sustaining measures, resuscitation, and comfort care. This works alongside your healthcare power of attorney to give your medical team and family clear guidance.

New Jersey’s Inheritance Tax: What Makes It Different

New Jersey eliminated its estate tax in 2018, but it still has a separate inheritance tax. The distinction matters: an estate tax is based on the total value of the estate, while an inheritance tax is based on the relationship between the deceased and the beneficiary.

This means that if you leave assets to a sibling, they could owe 11-16% in NJ inheritance tax. If you leave assets to an unmarried partner or a friend, they could owe 15-16% from the first dollar. The inheritance tax return must be filed within eight months of the date of death.

For a more detailed breakdown, including how different asset types are treated, see our guide on What to Do With an Inheritance in New Jersey.

Beneficiary Designations: The Most Overlooked Part of Estate Planning

Many of your largest assets do not pass through your will at all. Instead, they transfer directly to named beneficiaries. These include:

• 401(k) and IRA accounts
• Life insurance policies
• Annuities
• Bank and brokerage accounts with transfer-on-death (TOD) or payable-on-death (POD) designations
• Jointly held property with rights of survivorship

Important: Beneficiary designations override your will. If your will says your IRA goes to your children but the beneficiary form still names an ex-spouse, the ex-spouse receives the account. Review and update beneficiary designations whenever you experience a major life change: marriage, divorce, birth of a child, or death of a beneficiary.

For retirement accounts, beneficiary choices also affect how quickly heirs must withdraw the money. Under the SECURE Act’s 10-year rule, most non-spouse beneficiaries must empty an inherited IRA within 10 years, which can create a significant tax burden.

How Probate Works in New Jersey

Probate is the legal process of validating a will, paying debts, and distributing assets. In New Jersey, probate is handled by the Surrogate’s Court in the county where the deceased resided.

• With a will: The named executor files the will with the Surrogate’s Court and receives Letters Testamentary, which grant authority to manage the estate.
• Without a will: The court appoints an administrator (usually the closest relative) who performs the same function but under court supervision.
• Timeline: Simple estates can be settled in a few months. More complex estates, or those involving disputes, can take a year or longer.
• Costs: Executor and attorney fees, court filing fees, and bond costs (if required) are paid from the estate. These typically total 3-7% of the estate’s value.

Assets held in a revocable trust, jointly held property, and accounts with beneficiary designations bypass probate entirely. For many New Jersey families, structuring assets to avoid probate is a practical goal that saves time, money, and stress.

How Estate Planning Connects to Your Retirement Plan

Estate planning and retirement planning overlap in several important ways:

• Roth conversions can benefit heirs. Converting pre-tax IRA funds to Roth during your lifetime means your heirs inherit tax-free Roth assets instead of taxable traditional IRA funds. This is especially valuable under the 10-year rule. See our guide on Roth IRA Conversion Strategies for New Jersey Residents.
• Life insurance and the NJ inheritance tax. Life insurance proceeds paid to a Class C or D beneficiary are subject to NJ inheritance tax. Placing a life insurance policy in an irrevocable life insurance trust (ILIT) can help keep proceeds out of the taxable estate for both federal estate tax and NJ inheritance tax purposes.
• Long-term care planning. An extended period of long-term care can deplete the assets you planned to leave to heirs. Integrating long-term care planning into your estate plan helps address this risk.
• Charitable giving. Qualified Charitable Distributions (QCDs) from IRAs and charitable remainder trusts can reduce your taxable estate while supporting causes you care about. For retirees taking RMDs, QCDs are one of the most tax-efficient giving strategies.

Common Estate Planning Mistakes

• Not having a plan at all. Dying without a will (“intestate”) means the state decides who gets your assets, who manages the process, and who serves as guardian of your children.
• Outdated beneficiary designations. This is one of the most frequent issues advisors see. An old beneficiary form can undo even the most carefully drafted will or trust.
• Not planning for incapacity. Estate planning is not just about death. A durable power of attorney and healthcare proxy are essential for managing finances and medical decisions if you are alive but unable to make decisions yourself.
• Ignoring the NJ inheritance tax. Because Class A beneficiaries are exempt, many people assume there is no state-level concern. But if you intend to leave assets to siblings, nieces, nephews, friends, or an unmarried partner, the tax can be substantial.
• Setting it and forgetting it. Estate plans should be reviewed every three to five years, or whenever there is a major life event. Tax laws change, family circumstances change, and your financial picture changes.

How the Team at GPS Wealth Management Can Help

While the team at GPS Wealth Management does not draft legal documents (that is the role of an estate planning attorney), they work closely with clients’ legal and tax professionals to coordinate estate plans with retirement income, tax, and investment strategies. This coordination helps make sure that beneficiary designations, account titling, and asset distribution plans work together rather than at cross-purposes.

If you need to create or update your estate plan, or if you want to understand how your current plan interacts with your retirement strategy, contact the team at GPS Wealth Management for an introductory meeting. There is no cost or obligation for the initial consultation.