Massachusetts Estate Tax

Five Things to Know About the Massachusetts Estate Tax

by

As the summer ends, the school year begins, and Halloween looms, the fun and games are over and our thoughts turn to two of our favorite topics, death and taxes.  As you may know, the federal estate tax law allows you to leave  $13.99 million to your heirs estate federal tax free.  This federal estate tax “exemption” is scheduled to increase to $15 million on January 1, 2026, and will be indexed for inflation thereafter, allowing a married couple (with proper tax filings at the death of the first spouse to die) to leave a combined $30 million to their heirs free of federal estate tax.  However, here in Massachusetts we are one of only twelve states and the District of Columbia that impose a separate state estate tax. If you live in Massachusetts or own real estate here it is understandable why death and taxes may be two of your favorite topics, since there is much to talk about.   Here are five things to know about the Massachusetts estate tax.

1. Massachusetts Estate Tax Exemption.  The Massachusetts estate tax is a one-time tax due nine months after death and based on the value of the assets owned by the deceased person on the date of their death.  The law changed effective January 1, 2023, to increase the Massachusetts estate tax exemption to $2 million.  The exemption is the amount you may leave to your heirs without paying any estate tax.   Previously, the Massachusetts estate tax exemption stood at $1 million; however, that was more like a cliff than an exemption.  If the value of the estate at death was over $1 million in value, the estate was taxed starting at the first dollar of value. With the recent estate tax change, Massachusetts has a true $2 million exemption, which means the estate is taxed only on the amount over $2 million. Massachusetts imposes estate tax based on a graduated rate schedule ranging from 7.2% for estates just over $2 million to 16% for estates over $10 million. For example, if you die with assets of $2.5 million in Massachusetts, the estate tax due would be approximately $39,200. If you die within an estate of $5 million your estate will pay an estate tax of approximately $292,000.

2. Eliminating or Deferring the Estate Tax Due.  There are ways to eliminate or defer the estate tax that may be payable at your death. Assets left to charity pass free of estate tax.  If you are feeling especially generous and leave your entire estate to a charity, regardless of the value of your estate, there will be no estate tax payable at your death. Most people who are married leave their estate to their spouse, and this will also result in no estate tax payable at the death of the first spouse to die. However, at the death of the surviving spouse, when assets typically pass to children or other family members, an estate tax will be due if the value of the surviving spouse’s estate exceeds $2 million. Certain trusts can be prepared as part of an estate plan that addresses estate tax planning, typically called “credit shelter trusts,” that can shelter a portion of the estate of the first spouse to die in trust for the benefit of the surviving spouse in such a way that those trust assets are not taxed in the surviving spouse’s estate. These types of trusts are commonly used to significantly reduce (if not completely eliminate) the estate tax that will be paid at the surviving spouse’s death, thereby saving taxes for the children or the heirs who inherit the estate after the surviving spouse passes away.  There are other types of trusts that can be used to further reduce the estate tax for larger estates.

3. Deathbed Gifts.  A discussion of death and taxes would not be complete without a mention of deathbed gifts.  In Massachusetts, it is possible to make gifts immediately before death and have those gifts not be considered part of the taxable estate of the gift giver. Therefore, if you have a taxable estate and are in poor health, you might consider making gifts of assets to your heirs prior to your death in order to reduce the estate tax that will be paid after your death. Cash is an excellent asset to give in these circumstances. It is very important to keep in mind two things when making deathbed gifts: (1) if you make a gift of appreciated assets such as real estate or investments, the recipient takes the tax basis of the gift giver, and (2) when a person dies owning appreciated assets under current tax law the tax basis of those assets automatically increases at death to equal the value of the asset on the date of death (the so-called “step-up” in basis), essentially wiping out the unrealized capital gain on those assets. Therefore, in many circumstances, it is more valuable to retain highly appreciated assets until death, even if Massachusetts estate tax may need to be paid on the value of the estate, in order to eliminate the unrealized capital gain and the capital gain tax that would need to be paid if those assets are sold after death, as the capital gain tax is often greater than any estate tax that would be paid.

4. Getting Out of Dodge.  Many clever folks think about moving to another state to avoid the Massachusetts estate tax.  In a word, this is easier said than done. Many of our fellow New England states also have their own separate state estate tax (Vermont, Maine, Rhode Island, Connecticut). If you are considering a move to the lovely state of New Hampshire, which does not have a separate state estate tax, keep in mind that the Massachusetts Department of Revenue will closely examine your ties to Massachusetts at your death to determine if you were domiciled in this state and are therefore subject to Massachusetts estate tax – even if you claim to live in another state. There are many factors the state looks at, including things like where you file your state income taxes, where your doctors are located, where you vote, where your cars are registered, where you belong to clubs and organizations, and where your bills are mailed.  For income tax purposes, the length of time you spent in the other state is important, however for estate tax purposes where you intend to be domiciled is crucial. And if you continue to own real estate in Massachusetts, see consideration #5 below.

5. Non-Residents Owning Massachusetts Real Estate.  The recent updates to the Massachusetts estate tax law clarified that if you are Massachusetts resident owning real estate in another state, the value of that out of state is real estate is not includable when calculating the value of your Massachusetts estate on which Massachusetts estate tax is payable. However, if you are an out of state resident owning Massachusetts real estate, you may owe Massachusetts estate tax to the Commonwealth of Massachusetts at your death proportionate to the value that real estate bears to your total estate if the value of your total estate is in excess of the Massachusetts estate tax exemption. Therefore, for those of you intending to keep your house on the Cape and move to New Hampshire to avoid Massachusetts estate tax, be aware that you will not avoid the tax completely even if you successfully change your domicile to New Hampshire. There may be strategies that can be used to change the nature of what you own in order to avoid the estate tax, but this must be done taking into account all the facts and circumstances. 

There are so many interesting things to know about the Massachusetts estate tax. Every client’s situation is unique in terms of the value of their assets, the type of assets they own, who their beneficiaries are, how the estate and capital gain tax laws will impact their estate at their death, and whether tax planning is appropriate and advised based on their goals and the nature of their assets. For all of these reasons, it is important to get the advice of an estate planning attorney with experience in estate tax planning if you have assets valued at more than $2 million and you are a Massachusetts resident or own real estate here. If you are interested in doing estate tax planning to reduce your estate tax as much as possible and preserve the maximum amount of your stay for your heirs, please be in touch – we are happy to assist you.

 

Attorney Leah A. Kofos is an associate attorney with the Dedham firm of Samuel, Sayward & Baler LLC, which focuses on advising its clients in the areas of trust and estate planning, estate settlement, and elder law matters. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit ssbllc.com or call 781-461-1020.

© 2025 Samuel, Sayward & Baler LLC

Important Numbers for 2024 Estate Tax Planning

by

Important Numbers for 2024 Estate Tax Planning 

Each year around this time, the IRS comes out with the inflation adjusted federal Estate and Gift Tax exemption amounts for the following calendar year.  Here are the numbers for 2024.

2024 Federal Estate Tax Exemption

The federal estate tax exemption is the amount that each person is permitted to pass on free of any federal estate tax.  For 2024, this amount is $13.61 million per person (up from $12.92 million in 2023) which translates into $27.22 million for a married couple.  

2024 Annual Gift Tax Exclusion

The Annual Gift Tax Exclusion amount is the amount that a person may gift to any number of other individuals during a calendar year without impacting the donor’s Lifetime Gift Tax exclusion. For 2024, this amount will be $18,000 per person.  For example, a grandparent may give each of his or her five grandchildren $18,000 for a total of $90,000 during 2024 without needing to file a gift tax return (form 709) reporting the gifts and without any impact on the donor’s Lifetime Gift Tax exclusion.

2024 Lifetime Gift Tax Exclusion

In addition to the Annual Gift Tax Exclusion, each person has a Lifetime Gift Tax exclusion which is currently equal to the federal estate tax exemption – $13.61 million for 2024.  If gifts in excess of a person’s Lifetime Exclusion amount are made, tax on the excess gifts is payable by the donor (person making the gift) at the rate of 40%.  To the extent a person makes gifts over and above the Annual Gift Tax Exclusion amount, their Lifetime Gift Tax exclusion amount is reduced 

2024 Gifts to Spouses

Amounts passing to a U.S. citizen spouse either at the death of the first spouse or during lifetime in the form of gifts, pass free of federal and Massachusetts estate tax regardless of the amount.  

The same does not apply for non-U.S. citizen spouses.  When one spouse dies leaving assets to a surviving non-U.S. citizen spouse, there is no marital deduction permitted for those assets.  Since the deceased spouse may leave $13.61 million free of federal estate tax, the lack of a marital deduction does not matter for many people.

Lifetime gifts to a non-U.S. citizen spouse are limited to $185,000 (2024) per calendar year.  

What about Massachusetts? 

Massachusetts has its own estate tax system which until very recently had a $1 million threshold for taxable estates. As of October 4, 2023, we have a $2 million exemption and this is effective for estates of decedents dying on or after January 1, 2023.  This amount is not indexed for inflation so it will take another act of the Massachusetts legislature to increase it.  But still, we are grateful for the bump up to $2 million ($4 million for a married couple who undertake estate tax planning).

Keep in mind that Massachusetts does not have a gift tax.  As such, there is no limit on the amount you may give away under Massachusetts tax law. 

 If you are interested in discussing estate tax planning or creating a gifting plan, please contact our office to schedule a time to meet with one of our attorneys. 

 Attorney Suzanne R. Sayward is a partner with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts.  This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.

November, 2023

© 2023 Samuel, Sayward & Baler LLC

As the Massachusetts Estate Tax Turns

by

The Massachusetts estate planning world watched with bated breath this summer as we came closer than ever to increasing the Massachusetts estate tax threshold from $1 million to $2 million.  But alas, it was a false alarm.

As you may know, Massachusetts is one of only 11 states plus the District of Columbia to have a separate state estate tax.  Among those states, Massachusetts and Oregon are the two states with the lowest estate value that is subject to estate tax – $1 million.  If you die a resident of Massachusetts and own assets valued at $1 million or more, you will currently pay tax on the entire value of your estate.

Every year there are bills filed in the Massachusetts state legislature to increase the Massachusetts estate tax exemption.  This year, both the Massachusetts House and Senate passed bills that would raise the estate tax threshold from $1 million to $2 million, and it looked like the bills would be reconciled and become law.  However, at the last minute, the Governor raised the possibility that a 1986 law would trigger a requirement that the state return to taxpayers over $2 to $3 billion due to the state’s large budget surplus.  Needless to say, that put the brakes on any other form of tax relief until things are sorted out.

In the meantime, what’s a middle-class Massachusetts family to do about saving estate taxes?  As we all know, if you own a home in this state you are probably at least halfway to the $1 million estate tax threshold without even trying. Add to that the value of some life insurance, bank accounts, investments and/or an IRA or 401k and you are likely over $1 million without even trying.

For married couples in Massachusetts, credit shelter trusts are a go-to estate tax planning strategy which allows up to $1 million of assets to be “sheltered” in trust at the death of the first spouse to die such that those assets will not be subject to estate tax in the estate of the second spouse to die.  The surviving spouse can serve as Trustee of the trust and use the sheltered assets, as needed, for the surviving spouse’s health care and living expenses after the first spouse’s death.  If a credit shelter trust is created and funded appropriately, and depending on the size of the estate, the estate tax savings is significant. For example, a married couple with $2.5 million in assets would pay $139,000 in Massachusetts estate tax at the death of the second spouse without any tax planning.  If a credit shelter trust is in place and funded with $1 million at the death of the first spouse to die, the estate tax payable at the death of the second spouse would be reduced to $64,000, saving $75,000 in estate tax.

For single individuals, estate tax savings involves giving up control of assets, usually in the form of giving assets away to family members, charities or other beneficiaries.  Annual exclusion gifts of $16,000 per year per person can be given to as many individuals as desired each year without the need to file a gift tax return or pay any gift tax (unless these gifts exceed $12 million in total under current law).  These annual exclusion gifts, especially if given consistently over time, can reduce the value of the assets that will be subject to estate tax at death, and the corresponding tax that will be paid.   Gifts can also be given in unlimited amounts to pay tuition or medical expenses for another person.   However, before making gifts during life, the gift giver must carefully consider whether they can afford to do so.  Future living expenses and care costs are difficult to predict.  It may be smarter to retain control of assets to be sure living expenses and care costs in the preferred care setting can be paid, rather than worry about saving estate tax for heirs.  If the value of a person’s assets is diminished at the time of death due to spending on living and care expenses during life, the estate tax will be reduced naturally.

However, for single individuals with assets in excess of the estate tax threshold who are confronted with a terminal illness or a situation where death is imminent, deathbed gifts are a useful strategy to reduce estate taxes payable at death.  Gifts made immediately before death will reduce the value of the assets on which Massachusetts estate tax will be paid after death.  These gifts are possible only if the gift-giver is competent to make the gifts, or has a Durable Power of Attorney that specifically permits gifts to be made.

A few things to keep in mind when contemplating deathbed gifts:

  • If checks are written for gifting purposes, those checks must clear the bank account before death in order for the gift to be effective for estate tax purposes, and therefore it is better to make such gifts using bank checks that will withdraw the funds from the account immediately when the check is issued.  
  • As with any lifetime gift, gifts of appreciated assets transfer the gift-giver’s basis to the gift recipient, which will result in a capital gain tax if the gift recipient sells the gifted asset at a later date.  Holding appreciated assets until death under current law will provide a step-up in basis, eliminating any unrealized capital gain.  Consideration of the estate tax savings as compared to any future capital gain tax that would be paid is an important consideration in determining whether gifts of appreciated assets make sense.
  • A gift tax return may need to be filed post-death to report any gifts made in excess of $16,000 per person.  
  • Even if gifts are made that reduce the value of the gift-giver’s assets below $1 million, there may still need to be a Massachusetts estate tax return filed and estate tax paid, although the assets given away will not be subject to tax.  This is because gifts over $16,000 per person are considered when determining whether the value of the deceased person’s assets was $1 million or more at the time of death and whether an estate tax return must be filed.  However, the estate tax due is calculated only on the value of the assets not given away.  Although an estate tax return may still need to be filed, the estate tax paid will be less than if the gifts were not given.  

Deathbed gifts are a difficult subject, and something that a family may not wish to discuss at such a sensitive time. However, they are a useful strategy for a single person who may have held off on gifting during life for the reasons mentioned above, and whose estate will be subject to estate tax if gifts are not made.  It is important to get advice from an estate planning attorney if such gifts are contemplated, to make sure they are made the right way and using the right assets to achieve the most tax savings.

Stay tuned as we remain hopeful that the Massachusetts legislature will move forward to increase the estate tax exemption sometime soon, and make estate tax planning unnecessary for many residents of the Commonwealth.

Maria Baler, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham. She is also a former director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA), and the immediate past President of the Board of Directors of the Massachusetts Forum of Estate Planning Attorneys. For more information, visit www.ssbllc.com or call (781) 461-1020. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.

August 2022

© 2022 Samuel, Sayward & Baler LLC

Happy Anniversary to the Massachusetts Estate Tax!

by

Maria_144pxAs a follow-up to my July 2016 blog commemorating the 100th anniversary of the federal estate tax, and as promised in that post (and better late than never), we are recognizing the less-significant-but-still-worth-commemorating 40th anniversary of the Massachusetts Estate Tax.

The Massachusetts estate tax, like the federal estate tax, is a transfer tax that taxes the value of a decedent’s estate before the estate assets are passed on to the heirs who receive assets from the estate.

Before the current version of the Massachusetts estate tax (enacted in 2003), the tax was a so-called “sponge” tax, calculated based on the credit provided by the federal estate tax for estate tax paid to a state. When the federal government began phasing out its estate tax in 2001, Massachusetts “decoupled” from the federal estate tax, and implemented its current system of computing a separate state estate tax equal to the federal credit for state death taxes as it existed on December 31, 2000.

So when does a Massachusetts estate tax return have to be filed? The estate of every resident of Massachusetts who dies with an estate valued at $1 million or more must file a Massachusetts Estate Tax return within nine months of the date of death. If you are not a Massachusetts resident but own real estate in Massachusetts, you must also pay an estate tax to the Commonwealth at your death, assuming the total value of your estate is over $1 million.

What is an “estate”? In the estate tax world, your “estate” consists of any asset you own or control. So, for example, your home, your bank accounts, your investment accounts, your IRAs or 401k, your car, and your life insurance (if it is owned by you) are all assets that together constitute your “estate” and are countable when determining if your estate is worth more than $1 million at the time of your death.

If you have to file a return, will you have to pay tax? The answer is “it depends.” No matter how valuable your estate, if you leave your assets all to your spouse or all to charity, you will not have to pay any estate tax. Assets left to anyone else are subject to estate tax, which must be paid within nine months of the date of death. Unlike the federal estate tax, if the estate meets the $1 million filing threshold, the full value of the estate (less a $60,000 exemption) is subject to Massachusetts estate tax, not just the amount in excess of $1 million. The estate tax is computed on the value of the taxable estate (the value of your assets less deductions for funeral expenses, administrative expenses, debts, and assets passing to charity or a spouse), with rates ranging from 0.8% to 16% for estates in excess of $10 million.

If taxable gifts (gifts made in excess of the gift tax annual exclusion) are made during a deceased person’s lifetime, the total taxable gifts are added to the value of the estate on the date of death to determine whether or not the value of the estate is in excess of the $1 million filing threshold and an estate tax return must be filed. However, the estate tax is computed only on the value of the assets owned by the deceased on the date of death.

The Massachusetts Department of Revenue chose to celebrate the Massachusetts estate tax’s 40th anniversary by implementing the electronic filing of estate tax returns. An exciting development for those of us in the estate tax world, or at least it promises to be once the kinks are worked out!

If you have questions about the Massachusetts estate tax, whether your heirs may have to pay tax, how much they may have to pay, and what can be done to reduce the estate tax owed, call our office and schedule a time to meet with one of our estate planning attorneys. Estate tax planning is one of our favorite things to do!

January 2017

© 2017 Samuel, Sayward & Baler LLC

Wills • Trusts • Elder Law • Long-Term Care Planning • Estates

©2026 Samuel, Sayward & Baler LLP. All Rights Reserved. The information presented on this website should not be construed to provide legal advice, nor does it constitute the formation of an attorney/client relationship. Read the disclaimer.