estate tax planning

Who Pays the Massachusetts Estate Tax, and How Can It Be Avoided?

At Surprenant & Beneski, P.C., our estate planning attorneys are often asked these questions by the clients we serve in Southeastern Massachusetts so here is an informative blog on the topic. For more coverage of this important subject and how it affects your estate, contact us. Our highly competent estate tax planning attorneys will guide you to use strategies designed to protect your assets and ensure that your beneficiaries’ estate taxes are minimized or avoided so they receive their maximum inheritance.

The Basics of Massachusetts Estate Tax

Estate tax is a tax on the transfer of assets from an estate to its beneficiaries. It is calculated based on the total value of the individual’s estate at the time of their death. In Massachusetts in 2023, if the value of an estate exceeds the $1 million threshold, anything above $40,000 will be taxed. Massachusetts uses a graduated tax rate, which ranges between 0.8 and 16 percent. 

Who Is Responsible for Paying the Massachusetts Estate Tax?

The personal representative (executor) of the estate, typically appointed in the deceased’s will, is the person responsible for filing the estate tax return and paying the amount due from the estate’s funds. If the estate has insufficient liquid assets to pay the estate taxes, the personal representative may have to sell assets to cover the tax bill. 

Wherever possible, our estate tax attorneys will help you plan carefully to avoid this problem by employing the following strategies:

Exemptions and Gifting

One of the simplest ways to avoid the Massachusetts estate tax is through lifetime gifting. Individuals can be given up to $17,000 annually ($34,000 per married couple) without incurring any gift tax. This can effectively reduce your taxable estate below the $1 million threshold.

However, it’s crucial to understand that these gifting practices have different implications for MassHealth eligibility. Unlike IRS rules, MassHealth may consider such gifts as transfers affecting eligibility for certain benefits. This difference is often overlooked, yet it’s vital to recognize the distinct regulations governing IRS and MassHealth gifting rules and exemptions. Careful planning is necessary to ensure that gifting does not adversely impact MassHealth eligibility.

Trusts and Estate Planning

Trusts are an excellent means of minimizing estate taxes. Our estate planning attorneys have well-honed skills in this area, having extensive experience creating several kinds of irrevocable trusts, including irrevocable life insurance trusts (ILITs) to exclude the life insurance proceeds from your taxable estate and bypass trusts to protect assets for the benefit of the surviving spouse while limiting the estate tax impact.

Other Estate Planning Techniques Useful in Minimizing Estate Tax

Other strategies our lawyers use to help your beneficiaries inherit as much of your estate as possible include converting individual assets into annuities and taking advantage of marital deductions, in which assets transferred to a surviving spouse are exempt from estate tax. This must be done carefully, however, since without proper planning, the surviving spouse’s estate may then be taxed upon their death, defeating the ultimate purpose of such a maneuver.

We Play a Significant Role in Maintaining the Integrity of Your Estate

Our skilled estate tax attorneys are here to provide informed guidance on guide you on the Massachusetts estate tax. We will assist you in structuring your estate plan to take full advantage of tax exemptions and ensure that your wealth is protected for future generations by:

1. Customizing Your Estate Plans to reflect not only your financial situation but your needs and wishes as well. Our in-depth understanding of how the Massachusetts estate tax system works has the potential to save your beneficiaries hundreds of thousands of dollars.

2. Offering You Ongoing Legal Advice and Guidance if tax laws change or if your financial situation has to be re-evaluated because of changes in your lifestyle or family constellation.

Contact Our Accomplished Estate Planning Attorneys Today

When it comes to protecting your hard-earned assets and the security of your family, procrastination is never a good idea. Let us help you avoid the pitfalls of Massachusetts estate taxes by being proactive about planning your estate. Our goal, like yours, is to see to it that you leave your loved ones with the resources they need to secure a comfortable and meaningful future.