Understanding Massachusetts Estate Tax and its Impact on Trust Planning
Do You Have a Well-Rounded Estate Plan?
If you start planning your estate and how you would like it passed to your family without considering how Massachusetts’ estate taxes differ from federal taxes, you can see a large portion of your estate going to taxes instead of your family. Massachusetts taxes estates at a much lower rate than federally. If you are not using solid estate planning strategies, paying those estate taxes can come as a nasty surprise.
Contact The Heritage Law Center to find out your estate planning options and how you can plan beyond your will and protect your assets from excessive taxation. Call 617-765-9307 to schedule a consultation.
How Does Massachusetts’ Estate Taxation Differ from Federal Laws?
Even the most senior Massachusetts residents may not be aware of the significantly different taxation laws of The Bay State. Massachusetts taxes estates over $2 million instead of the $13 million threshold in federal taxation. Without proper planning, these taxes can wipe out your wealth well before your family ever sees a penny.
Suppose you live in Massachusetts and own real estate, significant investments, or substantial business assets. Use gift-giving tactics to transfer assets to a spouse tax-free
Use payable-on death and transfer on death accounts that bypass probate
Use proper business succession planning
The Heritage Law Center can educate you on your options and recommend the best tactics for smoothly transferring your wealth to your family. Financial wealth in the form of real estate, investments, and life insurance policies are all taxable and can put your estate well over that $2 million threshold.
- Some estate planning strategies you can use to minimize both probate and estate taxes include:
- Establishing one or more Trusts
- Using gift-giving tactics
- Transferring assets to a spouse tax-free
- Use joint ownership tactics with automatic asset transfer without probate
- Use payable-on-death and transfer-on-death accounts that bypass probate
Use proper business succession planning
The Heritage Law Center can educate you on your options and recommend the best tactics for smoothly transferring your wealth to your heirs.
How Can You Use Trusts to Avoid Excessive Taxation?
Trusts are an invaluable estate planning tool. A Trust is an entity to which assets are transferred. You may still be able to access assets depending on the type of Trust you create, but in most cases, the Trust will take ownership of the assets and you won’t be able to access them. They offer many benefits, including lower taxes and protection from creditors and lawsuits. These Trusts are known as Irrevocable Trusts. Once an Irrevocable Trust is funded, its terms cannot be changed, and it can’t be easily revoked.
What Trusts Offer Tax Benefits?
There are many Trusts that you and your estate planning attorney can use to lessen the impact of taxes on your estate and maximize how much of your wealth goes to family.
What Kinds of Trusts Offer Tax Benefits?
There are various Trusts you and your estate planning attorney can use to lessen the impact of taxes on your estate and maximize how much of your wealth goes to your family.
Irrevocable Life Insurance Trusts
An Irrevocable Life Insurance Trust (ILIT) allows you to remove your life insurance policies from your taxable estate.
Charitable Remainder Trusts
This trust allows you to reduce the tax burden of your estate. A Charitable Remainder Trust allows you to donate assets while still receiving income for a specified period up to the rest of your life. A CRT reduces estate taxes and may even offer various income tax deductions.
Qualified Personal Residence Trusts
A Qualified Personal Residence Trust (QPRT) allows you to transfer your primary or secondary home into a Trust while retaining the right to live in it for a set term. When that term ends, ownership of the home transfers to your beneficiaries at a reduced gift tax evaluation.
Most Trusts that remove assets from your ownership offer some form of tax benefit or asset protection. While using a Living Trust is a great way to manage your assets and their distribution to your beneficiaries and limit the amount of your estate that must pass through probate, they don’t really offer tax benefits.
How are Massachusetts Legislative Changes Affecting Estate Taxes?Massachusetts estate tax laws
recently changed. Massachusetts estate tax laws
recently changed. The “cliff effect” was also eliminated. Do You Need an Estate Planner?
Does your family really want to gamble their inheritance? If you don’t work with an estate planning attorney who knows about estate taxes and how to minimize them, your family may lose out on a lot of money. Do not delay. You never know what lies ahead.
