Do Changes to the Massachusetts Estate Tax Mean Changes to My Estate Plan?

The estate tax applies to the estates of individuals who passed away with a taxable estate exceeding a certain threshold. In August, Massachusetts increased its estate tax “threshold” to $2,000,000 for the estates of all decedents who died on or after January 1, 2023. This doubles the estate tax exemption (from $1,000,000) that had been established on January 1, 2006 and moves the Commonwealth from having the lowest states estate tax exemption to the third-lowest in the nation.

What does this mean?

For Massachusetts residents who die on or after January 1, 2023, it means that their estates will only have to be filed if the decedent’s “Massachusetts taxable estate” is valued at more than $2,000,000.  Unlike the previous estate tax definition, this new Act treats the new amount ($2,000,000) as a true exclusion.

Estates above $2,000,000 will be subject to tax on the excess at a rate starting at 7.2 percent and increasing with the size of the estate, up to 16 percent.

What makes up my “Massachusetts taxable estate”?

1. The gross value of your estate as of the date of your death – this includes assets that pass through probate (those assets owned by you individually without named beneficiaries), proportional value of assets owned with someone else, and all assets with a beneficial interest.
2. The Decedent’s adjusted taxable gifts made after December 31, 1976; and
3. Decedent’s total specific exemption for gifts made after September 8, 1976.

What if I own real property outside of Massachusetts?

The Massachusetts estate tax owed by your estate will be reduced proportionate to the value of the non-Massachusetts assets.  This means that their value is included as part of your Massachusetts taxable estate, but the value of the estate tax owed will be reduced proportionate to the value of the out-of-state assets.

What if I am not a resident of Massachusetts, but own property in Massachusetts?

Non-Massachusetts residents who own real or tangible personal property in Massachusetts are required to file a Massachusetts estate tax if their “Massachusetts taxable estate” is valued at more than $2,000,000.

The definition of a non-resident’s “Massachusetts taxable estate” is not limited to the physical assets located in Massachusetts but is defined the same as it is for a resident.  However, the tax calculated will be proportional to the value of the physical assets located in Massachusetts.

Do I need to update my estate plan?

Maybe. Whether this change affects your estate plan depends upon many factors:  your asset holdings, your family situation and your specific needs and wants.  Many plans will be unaffected, and no change will need to be made.  Contact your estate planning or elder law attorney if you feel you may need to update your estate plan.

Founded by a nurse attorney and with offices in Acton, Sudbury, and Andover, Massachusetts, Generations Law Group helps families navigate the complex areas of estate planning and elder law to inform and protect loved ones of every generation.

 

 

 

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