Let’s say a guy is married three times. In Marriage No. 1, he has two biological children. In Marriage No. 2, he gets three stepchildren. Marriage No. 3 brings no children.
In this scenario, are the children from Marriage No. 2 considered Class A beneficiaries?
nj.com’s recent article on this subject asks, “I've had three marriages. Will my stepchildren owe the inheritance tax?” The article explains that with inheritances in New Jersey, so-called Class A beneficiaries can receive transfers at death with no inheritance tax.
The inheritance tax is levied on some inheritances, but not all of them. Whether you’re subject to the tax, is based on your relationship to the decedent (the person who died).
Only six states still have an inheritance tax: New Jersey, Nebraska, Iowa, Kentucky, Maryland, and Pennsylvania.
Class A beneficiaries include a spouse, civil union or domestic partner, parents, grandparents, children (including adopted children), and their descendants, stepchildren and a mutually-acknowledged child as defined in the statute.
However, step-grandchildren aren’t Class A beneficiaries. There is some legislation that’s been introduced to make them Class A beneficiaries.
A stepchild is defined by New Jersey statute as "a child of the surviving, deceased or former spouse, who is not a child of the decedent."
The law doesn’t say the decedent must not remarry in order for the child of the former spouse to remain a stepchild. Unlike other states like Iowa—where the stepchild's status derives from the marriage and thus ends on divorce—New Jersey’s definition says that the child of a former spouse remains a stepchild and thus a Class A beneficiary.
Therefore, based on the scenario at the top, it looks like the children from Marriage No. 2 are still considered Class A beneficiaries.
Consideration should also be given to qualification as a mutually-acknowledged child, if the decedent, for not less than 10 years prior to the transfer, stood in a mutually acknowledged relation of a parent, as long as the relationship started prior to the child's 15th birthday and was continuous for 10 years thereafter.
Blended families can be complex, when it comes to inheritances and tax obligations. An estate planning attorney will be able to create an estate plan that will achieve whatever goals you want regarding caring for children from various unions.
Reference: nj.com (February 21, 2019) “I've had three marriages. Will my stepchildren owe the inheritance tax?”