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Estates and Trusts
Understanding Income Tax
New Jersey is known for Jersey sweet corn, shown here at a farm in Mercer County.
GIT-12
January 2024
Types of Estates and Trusts .................................................................................................................................. 2
Estate and Trust Filing Requirements ................................................................................................................. 3
Tax Year ........................................................................................................................................................................................................ 3
New Jersey Tax Nexus............................................................................................................................................................................. 3
Electing Small Business Trusts ............................................................................................................................................................. 3
Estates Other Than of a Deceased Individual ................................................................................................................................ 4
Trusts Exempt From Tax ......................................................................................................................................................................... 4
Estimated Tax Payments ........................................................................................................................................................................ 4
Estate and Trust Income Reporting Requirements ............................................................................................ 4
Resident Estates and Trusts .................................................................................................................................................................. 4
Nonresident Estates and Trusts .......................................................................................................................................................... 4
Pension, Annuity, and IRA Income ..................................................................................................................................................... 5
Beneficiary Filing Requirements .......................................................................................................................... 5
Resident Beneficiary ................................................................................................................................................................................ 5
Nonresident Beneficiary ......................................................................................................................................................................... 6
Beneficiary Income Reporting Requirements .................................................................................................... 7
Income Category and Return Year ..................................................................................................................................................... 7
Distributed Income .................................................................................................................................................................................. 7
Pension, Annuity, and IRA Income ..................................................................................................................................................... 8
Grantor Trusts ............................................................................................................................................................................................ 9
Tax-Exempt Charitable Organization ................................................................................................................................................ 9
Connect With Us. ................................................................................................................................................... 9
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Estates and Trusts
Understanding Income Tax
GIT-12
January 2024
Types of Estates and Trusts
Nonresident estate or trust means an estate or trust that is not a resident.
Resident estate means the estate of a decedent who was domiciled in New Jersey at the time of death.
Domicile means the place and state you consider your permanent home.
Resident trust means:
A trust, or part of a trust, consisting of property transferred by will of a decedent who at the time of death
was domiciled in New Jersey; or
A trust, or part of a trust, consisting of the property of a person domiciled in New Jersey:
a) At the time the property was transferred to the trust, if the trust or part of a trust was then irrevocable;
or if it was then revocable and subsequently has not become irrevocable; or
b) At the time the trust, or part of a trust, became irrevocable, if it was revocable when the property was
transferred to the trust but has since become irrevocable (See definitions below).
A revocable trust is a legal arrangement designed to hold someone’s assets for the benefit of their heirs. It is
revocable because it can be altered or canceled. Ownership of the property contained in the trust can be restored
to the person who created it.
An irrevocable trust – or portion of a trust – also contains someone’s assets, but ownership of that property
cannot revert back to the person who created it.
Grantor trusts allow the grantor, the person providing the property for the trust, to keep control over the income
– or the money or property that produces income – for a named beneficiary. The grantor is considered the owner
of the property and its income and pays tax on the income and distributions attributable to the trust.
A grantor trust must file a Form NJ-1041. If the grantor trust income is reportable by or taxable to the grantor
for federal income tax purposes, it also is taxable to the grantor, and not the trust, for New Jersey Income Tax
purposes. The grantor trust must report all of its income and also deduct distributions to the grantor equal to
the total income reported.
The grantor’s name, address, and identification number must be listed on the beneficiary’s or grantor’s share of
income, Schedule NJK-1 (Form NJ-1041).
Charitable remainder trusts and charitable unitrusts are subject to Income Tax filing requirements because
they are not operated exclusively for charitable purposes. For more information, see Charitable Remainder
Trusts.
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Estates and Trusts
Understanding Income Tax
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January 2024
Estate and Trust Filing Requirements
A fiduciary is a guardian, trustee, executor, administrator, receiver, conservator, or any person acting in any
fiduciary, trust, or similar capacity for any person.
The fiduciary of every resident estate or trust must file a New Jersey Gross Income Tax Fiduciary Return (Form
NJ-1041) if gross income was more than $10,000 for the tax year.
The fiduciary of every nonresident estate or trust that had income from New Jersey sources also must file if gross
income received from all sources (both inside and outside New Jersey) during the tax year was more than $10,000.
Part-year estates or trusts must prorate the filing threshold of $10,000 based on the number of months covered
by the return to determine whether or not they are required to file a return.
Tax Year
The tax year of the estate or trust must be the same as the tax year used for federal purposes and cannot be
longer than 12 months.
New Jersey Tax Nexus
A resident estate or trust does not have sufficient nexus (a tax presence) with New Jersey and is not subject to
New Jersey tax if it:
Does not have any tangible assets in New Jersey; and
Does not have any income from New Jersey sources; and
Does not have any trustees or executors in New Jersey.
The fiduciary of an estate or trust that meets all of the above requirements must file Form NJ-1041. Check the
box on line 27 of the return, and include a statement written by the fiduciary certifying that the estate or trust is
not subject to tax.
An institutional trustee has New Jersey tax nexus if the institution conducts business in offices located in New
Jersey, even if the office administering the estate or trust is located outside New Jersey.
Electing Small Business Trusts
A federal Electing Small Business Trust can elect to be taxed in New Jersey in the same manner as for federal tax
purposes. The NJ-1041SB contains the New Jersey election information and filing instructions.
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Estates and Trusts
Understanding Income Tax
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Estates Other Than of a Deceased Individual
For New Jersey tax purposes, the term “estate” refers only to the estate of a deceased person. The State Income
Tax liability of a minor, a person who is legally declared incompetent, or of any person who is suffering from
some other legal disability must be reported on a New Jersey resident return (Form NJ-1040) or nonresident
return (Form NJ-1040NR). The returns must be filed under the name and Social Security number of the disabled
individual and signed by the guardian or conservator.
Trusts Exempt from Tax
Trusts that form part of a pension or profit-sharing plan, and trusts that are taxable as corporations for federal
income tax purposes, are not required to file Form NJ-1041 or pay New Jersey Income Tax.
Estimated Tax Payments
An estate or trust is required to make quarterly estimated tax payments for any tax year in which its estimated
tax is expected to be more than $400.
Exceptions. New Jersey follows the federal exception under I.R.C. Section 6654. Therefore, the following are not
required to make estimated payments for any tax year that ends within two years of the decedent’s death:
A decedent’s estate; or
A trust that is considered to be owned by the decedent if the trust will receive the residue of the
decedent’s estate under the will, or if no will is admitted to probate, the trust primarily responsible for
paying debts, taxes, and expenses of administration. Generally, the residue of the estate is the property
that remains after specific gifts and expenses are distributed.
Estate and Trust Income Reporting Requirements
Resident Estates and Trusts
You must report all taxable income received during the tax year from all sources, both inside and outside New
Jersey. Do not include income from exempt obligations on the taxable income lines of Form NJ-1041. You can
find information on income from exempt obligations in Nontaxable Investment Income.
Nonresident Estates and Trusts
Income from all sources. You must report income from all sources, both inside and outside New Jersey.
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Estates and Trusts
Understanding Income Tax
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January 2024
New Jersey source income. Income from sources within New Jersey for a nonresident estate or trust means
those items that are earned, received, or acquired from the following sources:
Remuneration received for services rendered in New Jersey;
Net income from a business, trade, or profession located in New Jersey;
Rents or royalties from real property (such as land or buildings) and tangible personal property (such as
cars or furniture) or from other business activities located in New Jersey;
Net gains from a disposition (such as a sale or lease) of real property or business property located in New
Jersey;
Net gambling winnings from a casino, racetrack, or other source located in New Jersey, and New Jersey
Lottery winnings from prize amounts over $10,000;
Net distributive share of partnership income allocated to New Jersey;
Net pro rata (proportional) share of S corporation income allocated to New Jersey from a New Jersey S
corporation.
New Jersey source income does not include:
Income or gains from intangible personal property (such as patents or trademarks) unless it is earned,
received, or acquired in connection with a trade, business, or occupation carried on in New Jersey;
Distribution of interest from a corporate bond; or
Dividends from publicly traded stocks.
Pension, Annuity, and IRA Income
Generally, pension and annuity income received by a survivor or beneficiary is taxable if they exceed the
decedent’s previously taxed contributions to those retirement plans. If the pension or annuity was subject to the
New Jersey Inheritance Tax, the value of the pension or annuity for New Jersey Inheritance Tax purposes is
considered to be the decedent’s previously taxed contributions and is deductible in determining the taxable
amount received. For more information, see Retirement Income.
A nonresident estate or trust must include pension, annuity, or IRA income paid or distributed as income from
all sources and report it on the “Other Income” line of Form NJ-1041. It is excludable from “New Jersey source
income”on Schedule E.
Beneficiary Filing Requirements
Resident Beneficiary
A resident beneficiary reports all income distributed from estates or trusts.
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Estates and Trusts
Understanding Income Tax
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January 2024
A resident beneficiary must file either a New Jersey resident return (Form NJ-1040) or fiduciary return (Form
NJ-1041) if gross income received from all sources (both inside and outside New Jersey) during the tax year was:
More than $10,000 for a filing status of single; married/CU partner, filing separate return; or estates or
trusts; or
More than $20,000 for a filing status of married/CU couple, filing joint return; head of household; or
qualifying widow(er)/surviving CU partner.
A beneficiary filing a part-year resident return whose annual income from all sources (inside and outside New
Jersey) exceeds the filing threshold amount for their filing status is subject to New Jersey Income Tax on the
portion of income received while a New Jersey resident. Part-year residents see Part-Year Residents.
Nonresident Beneficiary
A nonresident beneficiary who had income from New Jersey sources must file a New Jersey nonresident return
(Form NJ-1040NR) or a fiduciary return (Form NJ-1041) if their gross income received from all sources (both
inside and outside New Jersey) during the tax year was:
More than $10,000 for a filing status of single; married/CU partner, filing separate return; or estates or
trusts; or
More than $20,000 for a filing status of married/CU couple, filing joint return; head of household; or
qualifying widow(er)/surviving CU partner.
Income from all sources is determined and reported as if the beneficiary were a New Jersey resident. The total
is used to determine whether the beneficiary must file a New Jersey Income Tax return.
New Jersey source income. Income from an estate or trust retains the same source in the hands of the
beneficiary as it had in the hands of the estate or trust.
For example, a distribution of a trust’s income from rental property located in New Jersey retains its taxability as
New Jersey source rental income for the beneficiary receiving the distribution.
A nonresident beneficiary’s New Jersey source income from an estate or trust includes:
Remuneration (i.e., wages or self-employed income) received for services rendered in New Jersey;
Net income from a business, trade, or profession located in New Jersey;
Rents or royalties from real and tangible personal property or from other business activities located in
New Jersey;
Net gains from a disposition (such as a sale or lease) of real property or business property located in New
Jersey;
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Estates and Trusts
Understanding Income Tax
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January 2024
Net gambling winnings from a casino, racetrack, or other source located in New Jersey, and New Jersey
Lottery winnings from prize amounts over $10,000;
Net distributive share of partnership income allocated to New Jersey;
Net pro rata share (proportional share) of S corporation income allocated to New Jersey from a New
Jersey electing S corporation.
New Jersey source income does not include:
Income or gains from intangible personal property unless it is earned, received, or acquired in connection
with a trade, business, or occupation carried on in New Jersey;
Distribution of interest from a corporate bond; or
Dividends from publicly traded stocks.
A beneficiary filing a part-year nonresident return whose income from all sources (both inside and outside New
Jersey) for the year is more than the filing threshold amount for their filing status is subject to New Jersey Income
Tax on income earned from New Jersey sources.
That applies even though the income from New Jersey sources reported for the period of non-residence was
equal to or less than the filing threshold.
Beneficiary Income Reporting Requirements
Net losses in one category of income cannot be applied against income or gains in another category. In case of
a net loss in any category, enter “0” in that category.
Income Category and Return Year
The income distributed to a beneficiary is reported on the beneficiary’s Income Tax return in the category “Income
From Estates and Trusts,” which is part of the “Other” income line.
The ending date of the tax year of the estate or trust determines the tax year in which the beneficiary reports
income from the estate or trust. For example, an estate’s fiscal tax year is April 1, 2021, to March 31, 2022. The
beneficiary reports income from the estate on their 2022 calendar year return since the estate’s tax year ended
in 2022.
Distributed Income
Generally, the income or gains of an estate or trust that were paid, deemed to have been paid, credited, or
required to be distributed to a beneficiary are taxable to the beneficiary.
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Estates and Trusts
Understanding Income Tax
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January 2024
An estate or trust that files a New Jersey fiduciary return must provide each beneficiary with a Schedule NJK-1
(Form NJ-1041) that lists the beneficiary’s reportable income distributed by the estate or trust and the New
Jersey source income reportable by a nonresident beneficiary.
Beneficiary who has not received an NJK-1. Due to reporting differences between New Jersey and the IRS,
beneficiaries must get information from the fiduciary to properly determine the distributed income to report
on a New Jersey Income Tax return.
You can find explanations about New Jersey income reporting requirements in the New Jersey resident (Form
NJ-1040), nonresident (Form NJ-1040NR), and fiduciary (Form NJ-1041) return instructions. You also can find
information in Income From Partnerships, Income From S Corporations, and the Taxpayer Guide to Being
an Executor.
Pass-Through Business Alternative Income Tax Credit
Members in partnerships or S corporations pay taxes on the entity’s profits through their individual tax returns.
New Jersey law allows the entity to pay the tax, and the member to receive a tax credit for the payment.
Enclose a copy of your Schedule PTE-K-1 or Schedule NJK-1 with your return.
Pension, Annuity, and IRA Income
Generally, pension and annuity income received by a survivor or beneficiary are taxable to the extent that they
exceed the decedent’s previously taxed contributions.
If the pension or annuity was subject to the New Jersey Inheritance Tax, its value is considered to be the
decedent’s previously taxed contributions and is therefore deductible in determining the taxable pension,
annuity, or IRA income received.
The following income must be reported on Form NJ-1040, NJ-1040NR, or NJ-1041 and does not qualify for
the pension exclusion:
Taxable portions of pension, annuity, or IRA income that are paid directly to an individual beneficiary.
They are reported in the category “Income in Respect of a Decedent” and included on the “Other” income
line;
Taxable portions of pension, annuity, or IRA income distributed from an estate or trust to a beneficiary.
They are reported by the beneficiary as “Income From Estates and Trusts” on the “Other” income line.
A beneficiary can exclude a rollover of distributions from an inherited traditional IRA, Roth IRA, or other eligible
plan from New Jersey income if the rollover qualifies for deferral for federal income tax purposes. The income is
reportable when it is reportable for federal tax purposes.
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Estates and Trusts
Understanding Income Tax
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Pension or annuity income paid or distributed to a nonresident is not New Jersey source income, but must be
included in income from all sources (Column A of Form NJ-1040NR.)
Roth IRA distributions are
not taxable
for New Jersey purposes if they are not taxable for federal purposes.
For more information about pension and IRA income, see Retirement Income.
Grantor Trusts
The grantor should report the trust’s income as if the grantor had earned it. The income is reported in the same
income categories as reported on the NJK-1, Form NJ-1041 (i.e., interest, dividends, partnership income) and
not as income from estates and trusts.
Tax-Exempt Charitable Organization
New Jersey does not tax income distributed to an exempt charitable organization, even if the income is
permanently and irrevocably set aside in an invested income account.
Connect With Us
Email your State tax questions;
Visit a Regional Information Center;
Call (609) 292-6400;
Subscribe to our NJ Tax Alert E-News;
Follow us on:
The forms and amounts referred to in this Bulletin are those for Tax Year 2023. This document is designed to
provide guidance to taxpayers and is accurate as of the date issued.
Any reference in this publication to a spouse also refers to a spouse who entered into a valid same-sex marriage
in another state or foreign nation and a partner in a civil union (CU) recognized under New Jersey law.
