Owning an Interest in an LLC Can Be Subject to New Jersey Inheritance Tax

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Estate Probate Attorney

Recently an Estate executor connected with me about a decedent who owned a 30% interest in a LLC domiciled in Florida. It was not a single member LLC. The issue was whether NJ would treat the LLC interest as intangible property. Unfortunately for the estate, a member interest in an LLC is intangible property and is considered to be held in the state of decedent’s domicile (in this case NJ). So even though the LLC owned rental property located in another state, the decedent owned an intangible LLC member interest, not an interest in the underlying real estate – and the intangible property of a resident decedent is includible for NJ Inheritance Tax purposes.

If the decedent had owned an interest directly in the underlying real estate located outside of NJ, then decedent’s interest in the non-NJ real estate would be excluded for NJ Inheritance Tax purposes.

This is one reason why sometimes it’s better to buy a good legal liability insurance policy than to use liability avoidance entities like LLC’s or corporation. Here owning the real estate individually would not be taxed in NJ.

To discuss your NJ Estate Probate matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.