Three facts about estate planning in Massachusetts that you should know

Three facts about estate planning in Massachusetts that you should know

By: Eric P. Rothenberg, Esq. –

Estate planning in general means that you are engaging in financial planning, tax planning, and succession planning and we do this through the laws governing property, wills, and trusts. Here are three facts about Massachusetts law that you should know, which are very different from federal laws.

Estate Tax. Federal taxes levied against the deceased’s taxable estate in Massachusetts are extremely high. The rate can be as steep as 55% of the assets in your federal estate which pass on to those to whom you them. Moreover, these taxes must be paid in cash. They must also generally be paid within nine months from the date of death. This get comes very quickly after one passes away due to the needs for grieving, immediate family needs and business needs. While under federal law a single person can die and pass on over $5.4 Million to their heirs with no tax, in Massachusetts anything over $1 Million is taxed.

However, pre-planning your estate can lessen or even eliminate these taxes. Both the federal government and Massachusetts allow a certain amount—up to $1 million in MA and $5.4 Million federally–to be tax free. The creation of an estate plan means that one can use allowed exemptions to reduce or eliminate large estate taxes, and protect one’s family from having to use cash and assets they have inherited to pay the tax. There are some major caveats however. For example, in MA if you die with taxable estate of $1,000,000 there is no tax due. But once you go over that $1,000,000 the MA rate on estates is a whopping 41% for the next $93,000 of additional assets and then foes down to about 20% when you are above the mark by $200,000 and when over $2,000,000 it’s just under 10%. Thus, planning is a must.

Marital Deduction. Utilizing the marital deduction, an estate in Massachusetts can usually pass tax free to the surviving husband or wife. This also applies to the federal estate tax. This deduction can help your survivors avoid some estate taxes on the first to pass but much planning is needed if the surviving spouse is now single and cannot use a marital deduction.

Trust. A trust is a legal entity in which title to the property is vested in a trustee, but the benefits of ownership are enjoyed by another person or entity–the beneficiary. It is created by a grantor, also known as a settlor or donor. They all mean the same. The trust stipulates that the trustee act for the benefit of the beneficiary. Trusts are found in two types: revocable (also known as living trusts), where the creator keeps the right to alter, amend or revoke trust, or irrevocable, which cannot be changed except for very limited things. These trusts are generally drafted while you are alive but become unchangeable at death.

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