Strategies for Minimizing Estate Taxes for Woburn Residents
What Are Estate Taxes? The estate tax is levied when a person dies before their property can be transferred to the heirs. The estate tax threshold in Massachusetts is $2 million. This means that people are forced to pay estate taxes. Because of this, some clients in Massachusetts discover that they are in the territory of having estate taxes taken out of their estate upon their deaths, which could factor into their estate planning.
When it comes to avoiding estate taxes in Massachusetts, we use a few strategies for our clients. Please contact our office to schedule a consultation to learn more about ways to avoid or reduce estate tax and leave more for your loved ones. If the estate is valued at more than $2 million, then it will be taxed. The Massachusetts Department of Revenue requires that an estate file an estate tax return and pay estate tax when the gross estate plus taxable gift exceeds the threshold of $2 million. Our law firm will help you determine the taxable value of your estate and develop strategies to minimize your estate tax burdens. The top bracket is for taxable estates over $11 million. Here’s more information on how to calculate your Massachusetts estate tax. Here’s more information on how you can calculate your Massachusetts estate tax.
In Massachusetts, there are three primary ways to avoid or minimize estate taxes: gifting, creating trusts, and making charitable donations.
How to Avoid or Reduce Estate Taxes in MA?
By putting your assets into a trust, gifting property and assets to family members and close friends, or donating to charities of your choice, you’re essentially reducing the size of your estate. By reducing the size of your estate, the result is that your estate will pay less in terms of estate taxes, possibly even avoiding estate tax entirely if your estate’s value gets below the threshold.
There are many factors to consider when seeking to minimize estate taxes and not every strategy will work for every individual’s situation. We recommend contacting our law firm to speak with our attorney about your unique needs as you seek to avoid or reduce your vulnerability to estate taxes.
Should You Create a Trust to Minimize Estate Taxes?
You could create a credit shelter trust (also known as an AB or bypass trust) or an irrevocable trust.
Married couples may opt to set up an AB trust, which divides a joint trust into two parts (Trust A and Trust B) upon the death of the first spouse. It’s designed to minimize estate taxes for married couples.
Let’s say Mike and Sharon are a married couple. When Mike dies a part of the assets will go into Trust A (Sharon’s trust) and another portion into Trust B. In this scenario, there would be no estate tax. Sharon will continue to own and use the assets in Trust A for the rest of her life. She can also access the principal of Trust B, even though she does not technically own it. When Sharon dies, only Trust A assets will be subject to Massachusetts estate taxes. As long as Trust A does not exceed $2 million, estate tax should not apply. This type of trust offers both estate preservation and tax protection. The assets that are transferred into an irrevocable estate trust are not considered yours. Gift giving is a good strategy. By reducing the size of your estate, the value of your estate will be reduced. This could reduce estate taxes and reduce your estate’s value. Click here for information on the gift tax exemption.
This is not a strategy that will work for everyone or in every situation. Be careful when giving gifts to make sure they don’t exceed the tax-free allowance. For more information, contact our estate planning attorney. Contact our estate planning attorney for more information.
Can You Make Charitable Donations to Minimize the MA Estate Tax?
There are no annual limits for the amount of donations that you can give to charity. Such donations can reduce the size of your estate and count towards taxable deductions.
One option is to make charitable gifts upon your death to an organization of your choosing. This will provide a charitable estate tax deduction and reduce or potentially eliminate estate taxes.
However, if you wish to keep all estate assets within the family, charitable donations may not be an option.
Schedule a Consultation with Our Law Firm Today
There are several different strategies for reducing estate taxes in the state of Massachusetts. You and your family may benefit from charitable donations, annual gifts, and different types of trusts. Before deciding on any option, we recommend you consult our experienced estate planning lawyer to discuss your goals and financial situation.
Our law firm has extensive experience helping clients with estate planning needs in eastern Massachusetts. Our knowledge will help you reduce or eliminate estate tax vulnerabilities. Contact our law firm to schedule a free consultation to learn more about the legal services we can provide to you and your family. You can reach us at 617-765-9307.
