The Massachusetts estate tax is a transfer tax on the assets owned by Massachusetts residents at death, and non-residents who owned real estate or tangible property in Massachusetts. The tax applies to all of the assets in a decedent’s estate, such as Massachusetts real estate, bank accounts, tangible personal property, brokerage accounts, business interests, retirement accounts, annuities and life insurance policies, as well as taxable gifts made during life. The tax is paid from the estate before the assets are distributed to estate beneficiaries. Until recently, more and more estates were required to pay the Massachusetts estate tax because of the low filing threshold amount: $1Million per person.
A recent change to the Massachusetts estate tax was signed into law on October 4, 2023, increasing the filing threshold amount from $1 Million to $2 Million. Only estates with assets totaling $2 Million or above (including taxable gifts made during life) are required to file a Massachusetts Estate Tax return. Though the tax is calculated on all estate assets, the new law provides for a Massachusetts Estate Tax Credit of $99,600, which effectively eliminates the tax due for estates valued at $2 million or less. The tax rates range from 7.2% to 16% depending on the value of the estate.
Although the change to the estate tax was signed in October, it is retroactive to deaths occurring after January 1, 2023. Anyone who has already filed an estate tax return for a decedent who died after this date can expect a refund to be automatically issued by the Department of Revenue. For deaths occurring before January 1, 2023, the old rules still apply.
This change to the Massachusetts estate tax is a big step towards ensuring that your loved ones receive more of what you earned during your lifetime. With some additional tax-minimization techniques as part of your estate plan, we can work to reduce your tax liability even further. For clients with existing estate plans, this is an excellent time to review your documents to learn more about how this change will affect your family and whether you should consider any updates.
If you would like to discuss your potential estate tax liability or how this new law affects your estate plan, contact us today at info@MulhallWithrow.com or (781) 381-5287 to schedule a consultation!