Estate taxes in Massachusetts

Why the Recent Changes Could Cost Your Family Millions—and How You Can Protect Your Legacy

 

When Massachusetts announced the increase of the estate tax threshold from $1 million to $2 million, many of my clients and fellow residents breathed a sigh of relief. It sounds like great news, right? A higher exemption means fewer estates are subject to taxation. But let me tell you, this change is a double-edged sword that could cost your family millions if you don’t take immediate action.

 

As an estate planning attorney who’s been navigating these waters for years, I feel compelled to shed light on the hidden dangers lurking beneath this seemingly positive development. The clock is ticking, and failing to plan now could result in a financial nightmare for your loved ones.

 

The Illusion of Relief: Why the New $2 Million Threshold Isn’t Enough

 

At first glance, the increase from $1 million to $2 million seems generous. You might think, “Great, now I don’t have to worry about estate taxes unless I have over $2 million.” But here’s the kicker: It’s alarmingly easy to surpass that $2 million mark in Massachusetts.

 

Consider what’s included in your “estate”:

  • Real Estate Values: With skyrocketing property prices, your home alone could be worth close to or over $1 million.
  • Life Insurance Policies: Did you know that the death benefits from your life insurance are counted in your estate? A $1 million policy is not uncommon.
  • Retirement Accounts: Your 401(k), IRAs, and other retirement savings are fully included.
  • Investments and Bank Accounts: Stocks, bonds, mutual funds, and even your checking and savings accounts add up.
  • Personal Property: Valuables like jewelry, art, and collectibles aren’t exempt.

 

Add it all up, and you might be shocked to find you’re well over that $2 million threshold.

 

The Elimination of the “Cliff Effect”: A Double-Edged Sword

 

Under the old law, if your estate exceeded the exemption by even a dollar, the estate tax applied to the entire value of your estate—a nasty surprise known as the “cliff effect.” The new law eliminates this, taxing only the amount over $2 million.

 

Sounds better, right? Not so fast.

 

While eliminating the cliff effect reduces the tax burden for estates just over $2 million, it doesn’t change the fact that significant portions of your estate are still vulnerable without proper planning. The estate tax rates in Massachusetts are steep, ranging from 0.8% to 16%. Without a solid strategy, your family could face an estate tax bill of hundreds of thousands, if not millions, of dollars.

 

Out-of-State Property: You’re Not Off the Hook

 

If you’re a Massachusetts resident but own property in another state—like a vacation home in Maine or Florida—that property’s value is included in your Massachusetts taxable estate. This increases your estate’s value and could push you further past the exemption threshold.

 

While your estate will receive a credit against the Massachusetts estate tax for the proportionate share attributable to the out-of-state property, it’s still used to determine whether or not you have to file, so if you have a home in Massachusetts, and a home in another state, the $2 Million is very likely exceeded, and you will have to file the Massachusetts estate tax return

 

That’s a hefty sum that could have been mitigated—or even eliminated—with proper planning.

 

Non-Residents Owning Massachusetts Property: You’re in the Crosshairs Too

 

Are you a New Hampshire resident owning rental property in Massachusetts? Guess what? Massachusetts wants a piece of your estate too.

 

  • In-State Property for Out-of-State Residents: If you’re a non-resident but own real estate in Massachusetts, that property is subject to Massachusetts estate tax.
  • Potential Solution: If you’re a non-resident, placing Massachusetts property into an LLC can convert it into intangible personal property, which may not be subject to Massachusetts estate tax for non-residents.

 

But beware: This strategy requires careful execution and professional guidance to ensure it’s done correctly.

 

No Portability Between Spouses: Couples Need to Act Now

 

Unlike federal estate tax laws, Massachusetts does not allow “portability” of the estate tax exemption between spouses. This means if one spouse dies without utilizing their $2 million exemption, it’s lost forever.

 

What does this mean for you?

  • Without Planning: A married couple can only protect $2 million from estate taxes.
  • With Proper Planning: You can protect $4 million (both spouses’ exemptions), effectively doubling the amount shielded from taxation.

 

Failure to plan could result in your family unnecessarily paying hundreds of thousands of dollars to the state.

 

The Clock Is Ticking: Why Immediate Action Is Crucial

 

Every day you delay is another day your estate remains exposed to unnecessary taxation. The recent changes have effectively doubled the cost of failing to plan. The longer you wait, the fewer options you’ll have to protect your wealth.

 

We Can Reduce or Even Eliminate Your Estate Taxes

 

The good news is, with strategic estate planning, we can significantly reduce or even eliminate your Massachusetts estate tax liability.

 

Here are some proven strategies:

 

1. Credit Shelter Trusts (Bypass Trusts)

 

  • How It Works: Upon the death of the first spouse, assets equal to the estate tax exemption are transferred into a trust.
  • Benefit: Allows both spouses to fully utilize their $2 million exemptions, protecting up to $4 million from estate taxes.

2. Irrevocable Life Insurance Trusts (ILITs)

 

  • How It Works: Removes life insurance proceeds from your taxable estate by transferring policy ownership to an irrevocable trust.
  • Benefit: Keeps significant amounts (often millions) out of your estate, reducing potential taxes.

3. Annual Gifting Strategies

 

  • How It Works: You can gift up to $18,000 per recipient per year without incurring federal gift taxes.
  • Benefit: Reduces the size of your taxable estate over time, saving on estate taxes.

 

4. Qualified Personal Residence Trusts (QPRTs)

 

  • How It Works: Transfer your home to a trust while retaining the right to live there for a specified period.
  • Benefit: Removes the home’s value from your estate at a discounted rate, saving on estate taxes.

 

Why You Can’t Afford to Wait

 

Estate planning isn’t a luxury; it’s a necessity. The cost of inaction is simply too high to ignore.

  • Without Planning: Your family could face a massive estate tax bill, forcing them to sell assets or deplete inheritances.
  • With Planning: You can safeguard your wealth, ensuring it passes to your loved ones as you intended.

Join Me at Our Exclusive Estate Planning Seminar

 

Your legacy deserves more than guesswork. At our seminar, we’ll share actionable strategies tailored to protect your family’s future and ensure your hard-earned assets don’t fall into the wrong hands—or the government’s pocket. This isn’t just another seminar; it’s your chance to gain peace of mind knowing your loved ones are shielded from unnecessary stress and financial burdens.

 

Seats are filling up fast, so don’t wait—your family’s future is too important to delay. Reserve your spot now by clicking here.


 

Michael Monteforte, Jr.
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People come to me in trying times and when I tell them I can help them, the weight falls off their shoulders.