By Regina Snow Mandl
Massachusetts has raised the estate tax exemption from $1,000,000 to $2,000,000, retroactively to January 1, 2023. As a result, for decedents dying after 2022 who have a Massachusetts taxable estate of under $2,000,000, there will be no Massachusetts estate tax due.
Whatever you leave to your spouse is exempt from Massachusetts estate taxes. But what you leave to anyone else is taxed by Massachusetts on a scale of 7.2% – 16%. By doubling the exemption, it is now possible for families to save an additional $99,600 in estate taxes with proper planning.
Use it or lose it. Each spouse must use the Massachusetts estate tax exemption in his or her own estate plan. If you don’t use it, you lose it, as any unused amount of the exemption cannot be used by the second spouse to die. Since this also applies to the first $1,000,000, careful planning is crucial if you want to take full advantage of the estate tax exemption.
Non-residents with a Massachusetts taxable estate will also benefit from the increase in the exemption to $2,000,000.
What to do now:
- Previously, the recommendation was to have at least $1,000,000 under the estate of each parent, which could be held in a family trust to take advantage of the then Massachusetts estate tax exemption, and everything else would go to the surviving spouse. The result: no Massachusetts estate taxes due on the first death, and property in the family trust would go to the children estate tax free on the death of the second spouse to die. That amount can now be doubled.
- Massachusetts married couples with children should review their estate plans, assets, and beneficiary forms to see if they can increase, to $2,000,000, the amount of property to be held under their individual names to take advantage of the new law. Remember, the surviving spouse can still be a beneficiary of the family trust and receive distributions if needed.
- Some estate plans will be unaffected by the change. However, potentially saving nearly $100,000 in estate taxes for your loved ones is well worth a careful review.
NOTE: This message is intended to inform clients and friends of The Wagner Law Group about an important change in the law. It is not provided as legal advice on any specific matter and should not be relied upon for any purpose. If you have any questions please contact any member of our Private Clients team – we will be happy to assist you.