Massachusetts estate tax has to be paid on certain estates after the owner of property and assets has passed away. In addition to estate taxes assessed by the state of Massachusetts, taxes may also need to be paid to the federal government as well after a death. Estate tax obligations can significantly reduce the value of an inheritance, and can affect the legacy which a deceased person leaves behind.
It is important to understand whether Massachusetts estate tax will be charged on your estate or not. If you will be charged estate taxes, you may wish to explore options for trying to reduce or avoid taxation of your estate.
The Law Offices of James A. Miller, P.C. can provide you with assistance in exploring your options for avoiding or reducing estate taxes. Give us a call today to find out more.
Who Has to Pay Massachusetts Estate Taxes?
The Commonwealth of Massachusetts decoupled its estate tax laws from the federal government’s laws in 2003. Today, Massachusetts has its own requirements for estate taxes which have to be paid by those who live and own property in Massachusetts. According to Mass.gov, estate taxes will be assessed on any estate which has a value exceeding $1 million. Estate taxes are assessed at a sliding scale rate between 0 percent and 16 percent, depending upon the value of the estate.
When considering whether you are going to have to pay Massachusetts estate taxes or not, you need to add up all of the assets which count as a part of your taxable estate. It is also important to realize that if you have given away any substantial gifts over the course of your life, the value of those gifts could count as a part of the taxable estate, even if you no longer own the property. You must add lifetime adjusted taxable gifts to the value of assets owned at death in order to determine whether an estate exceeds the $1 million threshold which will trigger estate taxes in Massachusetts.
Spouses are permitted to pass assets to each other tax free, so a husband could leave a larger estate to his wife with no estate taxes being charged and vice versa. However, unlike under federal estate tax law, the excludable amount of each spouse is not transferrable. If a husband leaves everything to his wife, this does not now mean the wife can pass on $2 million tax free when she dies, even though the husband did not use any of his $1 million exemption from Massachusetts estate taxes.
If the couple wants to take advantage of the marital exemption and try to find ways to pass a total of $2 million tax free on without estate taxes being assessed, they should speak with a Massachusetts estate tax planning lawyer about their options. The use of trusts can make it possible for the spouse who dies first to make funds available to the surviving spouse, without those funds becoming a part of the estate the surviving spouse has to transfer upon death.
Who Has to Pay Federal Estate Taxes?
Federal estate tax rules are different from Massachusetts estate tax rules. Under federal law, the amount of money which is excluded rises periodically. As of 2016, each person may pass on $5.45 million in assets without incurring estate tax.
Like under Massachusetts law, spouses can transfer money to each other after death with no estate taxes being assessed on that money. The major difference is, if one of the spouses does not use his exemption, that will also pass on to the other spouse. This effectively ends up meaning a married couple can pass a total of $10.9 million as of 2016 without incurring estate taxes- $5.45 million-plus $5.45 million.
Couples can thus engage in tax planning which allows them to leave a substantial nest egg to loved ones without having to pay federal estate taxes.
How a Massachusetts Estate Tax Planning Lawyer Can Help
The Law Offices of James A. Miller, P.C. provides invaluable assistance with trying to reduce Massachusetts estate tax and federal estate tax bills. You work hard for your money and to create a legacy and we will assist you in exploring all available legal alternatives to help you pass as much of that legacy as possible on to your heirs instead of giving it to the government.
To find out more about when estate taxes are assessed and when you may be able to tax steps to limit or avoid taxation, give us a call today at 508-799-8885 or contact us online to speak with a member of our legal team.