So, even if a decedent's estate is … There are a few common options depending on your situation: Lastly, for those of you who will do anything to avoid paying taxes, you could always move to a state with no estate tax. The Massachusetts Estate Tax is based on a Federal estate tax formula that was in effect in the year 2000. However, with proper planning, out-of-state residents may be able to avoid paying the MA estate tax. That does not mean you need to get rid of your Cape Cod house or pass it on to your kids. It has been my pleasure to work with Tim Erasmi this past year. Here are five ways that the super rich can shield their estates from the estate tax. Massachusetts estate tax returns are required if the gross estate, plus adjusted taxable gifts, computed using the Internal Revenue Code in effect on December … Another, more complex estate tax avoidance strategy developed in Massachusetts is the Q-TIP Trust. So what can you do to avoid the MA Estate Tax? The personal representative must file a Massachusetts Estate Tax Return ((Form M-706) if the decedent's estate, plus taxable gifts made during the decedent's lifetime, total more than $1 million. Depending on the total value of your estate and whether you are married, you and your spouse can create one or multiple types of trusts. Thanks to the new tax bill, very few will be susceptible to the Federal Estate Tax as the Federal exemption amount now sits at $11.2 million (effectively $22.4 million for married couples). The tax rate is based on a sliding scale from 0% to 16%. Depending on your particular case, other options may be available to you, such as Domestic Asset Protection Trusts (DAPTs), Spousal Access Trusts, Reverse Defective Grantor Trusts, MA Estate Tax Avoidance Trusts, QPRTs and Allocation or Sale to a Deceased Spouse’s Credit Shelter Trust. Also, the heads-up about future changes is helpful. I trust that my life’s work and asset was in the right hands. Massachusetts estate tax returns are required if the gross estate, plus adjusted taxable gifts, computed using the Internal Revenue Code in effect on December 31, 2000, exceeds $1,000,000. You can also download our Free Estate Planning Guide. Unfortunately, for those of you domiciled in Massachusetts, there’s another tax you have to worry about – the state’s Estate Tax – and the exemption amount is currently $1 million. The options outlined on this page are just some of the most common ways for non-residents to avoid MA estate tax. Lifetime Exemption– every taxpayer is entitled to exempt from federal gift and estate taxes up to the lifetime exemption limit which was set at $5 million back in 2012 but is adjusted annually for inflation. Sign Up Today! All Rights Reserved | ToS | Privacy Policy | Sitemap | Marketing By: Social Firestarter, LLC, At Boyd & Boyd, P.C. MARITAL TRANSFERS. Safekeeping Your Estate Planning Documents, 3 Estate Planning Mistakes You Don’t Want To Make. Gifting. Those who own an estate worth less than that amount will not owe taxes on it, but in the case of a couple who owns assets including real estate in Massachusetts that are valued above $1 million, the surviving spouse will be subject to MA estate taxes upon his or her death. LIVE WEBINAR: Have Changes In The Law Sabotaged Your Estate Plan? If you're responsible for the estate of someone who died, you may need to file an estate tax return. Gifts given during a person's lifetime eat away at the $11.58 million estate exemption. When you do this, the remaining amount is considered your Taxable Estate.In general, you will be able to deduct the marital deduction, charitable deductions, mortgages and debts, administration expenses of the estate, and losses during estate administration. At least one type of trust is set up to avoid and alleviate these taxes. Let’s look at three of the most common ones. 2017 © Perennial Trust. Massachusetts Estate Tax Exemption. Another option exists to avoid estate taxes in your own state. The Massachusetts estate tax exemption is $1 million. When you add up real estate, retirement accounts, and life insurance death benefits, many … In particular, attorney Timothy Era (...), Please provide your name and email address to subscribe to our monthly newsletter, © 2021 Law Offices of Boyd & Boyd, P.C. Unlike many other estate taxes, the Massachusetts estate tax applies to the entire estate, not just the amount above the exemption. Even if you don't do any planning to avoid probate, your estate may qualify for Massachusetts simplified "small estate" probate procedures. Currently, the Massachusetts Estate Tax Exemption is $1 million. The tax rate is based on a sliding scale from 0% to 16%. This approach only works for couples who do not wish to have separate trusts or are willing to convert their separate trusts into a joint one. If you are a resident of Massachusetts, and you die with more than $1 million in your “taxable estate,” then you owe a Massachusetts estate tax. By doing so, you transfer ownership of your property to the trust, and usually a spouse is assigned to have access to those assets after the death of the first spouse. But there are a few strategies that are commonly used to reduce or avoid paying estate taxes in Massachusetts. Except where a spouse is a noncitizen, neither lifetime gifts nor bequests at death to one's spouse are subject to estate taxes. Gifting You can reduce the size of your estate and thus the amount that is taxed by transferring funds to your heirs during life. The Federal estate tax can be reduced through various legitimate estate planning techniques. Most importantly, it helps avoid the Massachusetts Estate Tax. For tax year 2019, the federal estate tax exemption is $11.4 million per person. Working with an experienced Massachusetts estate planning attorney is the key to reducing your estate’s tax liability. Subtract deductions. While there is no Massachusetts gift tax, one must be mindful that any gift of over $13,000 is considered a “lifetime gift” that reduces your Massachusetts estate tax exemption by the same amount. In Massachusetts, an estate tax is generally applied to … I would HIGHLY recommend Boyd & Boyd for any estat (...). Should You Use A Tangible Property Memorandum? Inheritance taxes are levied against each individual bequest made from an estate to a beneficiary. Question: If you are a Massachusetts resident and have $3 million, give away $2.5 million and die four years later, so that your taxable estate is $500,000, do you avoid the Massachusetts estate tax? A knowledgeable estate lawyer can help you strategically plan for this goal. Not only is the exemption amount much smaller, it’s also not indexed for inflation, meaning the exemption value is shrinking in real dollars every year. While that still provides you with many benefits, such as probate avoidance, any estate added to a revocable living trust is still part of your taxable estate, and therefore still subject to the Massachusetts Estate Law. If you have any questions about the Massachusetts estate tax or estate planning in general, then please feel free to contact Joseph Lento at Perennial Trust by calling (781) 202 – 6368 or emailing jlento@perennialtrust.com. An estate tax is imposed on the overall value of an estate—everything a decedent owns at the time of their death. Florida and New Hampshire seem to be the most popular places to relocate for MA residents. What is the Massachusetts Estate Tax if Gifts Have Been Made? What is the Difference Between a Trust and a Will? Some couples choose to have a joint trust in order to shelter their Massachusetts real estate from paying estate taxes. One way to get around the estate tax is to hand off portions of your wealth to your family members through gifts. Typically, people believe that transferring their assets to a revocable living trust is enough to avoid estate taxes. This is why it is so important to consult an estate planning lawyer even if you do not feel rich at all. To make matters worse, unlike our income tax system that uses a progressive tax structure, the Massachusetts Estate Tax applies to your entire gross estate once you cross over the $1 million threshold! 1. As a result, many of our clients are turning their thoughts to how to avoid or reduce their state level estate tax. Prior to my father's passing, I went with him to one of Boyd & Boyd's trust seminars which was very informative and educational. This may result in significant tax savings with proper planning. Let’s take a look at some of the most popular options non-residents may choose. Some common estate planning tools and strategies used to accomplish that goal include: 1. Should one spouse die, trust funds can still benefit the surviving spouse without causing his/her own estate to exceed the threshold (if structured properly). The taxes on selling a rental house can add up fast. This trust would be … That is an incorrect assumption in most cases. In MA, if one spouse dies before estate planning steps are taken, and the couple happens to own an estate larger than $1 million, they may end up wasting a significant exemption amount. A popular choice for many families to reduce or avoid MA estate tax altogether is to have a change of residency. The Massachusetts estate tax is a little-understood tax that impacts middle-class families in our fair state every year. For tax year 2017, you can give any one person up to $15,000 tax-free (or up to $30,000 if you’re married and you’re filing joint tax returns). If the estate is worth less than $1,000,000, you don't need to file a return or pay an estate tax. Sorry we ran out of time at the end. Here are answers to five common questions about the Massachusetts estate tax. Lifetime gifts provide the added benefit of an income tax deduction. Simplified Probate Procedures. What Should You Do With Your Estate If You Have No Spouse or Children. So it should be no wonder that families find it difficult to form an estate plan that incorporates a Massachusetts estate tax strategy. Few people have an estate the size of Prince, who left behind an estimated $300 million when he died in April of 2016. In order to avoid that, another option some people choose is to transfer their assets into an irrevocable trust. This tool is provided to help estimate potential estate taxes and should not be relied upon without the assistance of a qualified estate tax professional. The best way to protect your assets is to create trusts. The transfer tax was repealed for 2010, but is reinstated at $1 million starting in 2011. The threshold for Massachusetts estate taxation is $1 million. Using an Irrevocable Trust to Avoid MA Estate Tax. There are too many types of trusts to cover the… So you would think Such an option brings numerous advantages, such as asset protection and potential income tax benefits. In each case, owners with their attorneys, accountants, and families must determine whether it make sense to take any of the planning steps available. Not surprisingly, Massachusetts continues to be one of the most expensive states in which to die. Reducing Your Estate Size by Giving Annual Gifts This is a strategy that allows you to reduce the size of your estate over a … perennial trust | Estate Planning. Here’s how this works: an out-of-state owner can organize an LLC and then choose to transfer his or her MA real estate into the LLC. Call us at (508) 775-7800. In addition to helping clients identify their distribution wishes, we also help clients minimize their estate tax burden so that more assets will be available to their beneficiaries. An amended return was then filed that excluded the apartment’s value from the decedent’s Massachusetts estate and requested a refund of $176,880. By establishing a joint or A/B trust, the couple can reduce or eliminate MA estate taxes due upon the death of the second spouse. You can reduce the size of your estate and thus the amount that is taxed by transferring funds to your heirs during life. The state denied the estate’s refund request. He recognized that having to do the work for my husband’s estate was very stressful. Very well done. 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