Massachusetts Estate Tax

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ed6739
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Joined: Wed Nov 07, 2018 6:13 pm

Massachusetts Estate Tax

Post by ed6739 » Wed Nov 07, 2018 7:37 pm

I live in Massachusetts and have revokable living marital trusts for each my wife and me. I don't understand the state estate tax and trust laws as well as I would like so any feedback is appreciated. Here is my understanding.
First: Mass has a 1 million exemption for estate tax so if your estate is less than 1 million there is no tax. If your estate is more than 1 million you are taxed on it all so in that case the exemption is of no value to you.
Second: The trust setup is complicated but essentially when the first spouse dies all trust assets are held for the surviving spouse and no estate tax is due at that time. When the second spouse dies up to 1 million of the first spouse estate is allowed to pass to heirs untaxed using the first spouse tax exemption. The amount of the first spouse estate in excess of 1 million becomes part of the second spouse estate. In virtually all cases the second spouse estate exceeds 1 million so Mass estate tax is due. In cases where both spouses have estates in excess of 1 million the exemption for the first spouse to die has been preserved. But the exemption for the second spouse is of no value.

bsteiner
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Re: Massachusetts Estate Tax

Post by bsteiner » Wed Nov 07, 2018 11:26 pm

That's a pretty good summary.

The $1 million trust is a nonmarital trust. Regardless of how much it grows during the surviving spouse's lifetime, it will pass to or in further trust for the children free of estate tax at the surviving spouse's death.

Massachusetts adopted both the Uniform Probate Code and the Uniform Trust Code in 2012, so for most people in Massachusetts there's no longer a need to create revocable trusts. I assume you created yours before 2012.

ed6739
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Re: Massachusetts Estate Tax

Post by ed6739 » Fri Nov 09, 2018 5:25 pm

Mine and my wife's trusts were setup before 2012 but it still seems beneficial to have them. One reason is to guarantee a 1 million dollar exemption from Mass estate tax.
Could you briefly explain in layman's terms what the Uniform Probate Code and the Uniform Trust Code are about?

FBN2014
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Re: Massachusetts Estate Tax

Post by FBN2014 » Sat Nov 10, 2018 11:56 pm

bsteiner wrote:
Wed Nov 07, 2018 11:26 pm
That's a pretty good summary.

The $1 million trust is a nonmarital trust. Regardless of how much it grows during the surviving spouse's lifetime, it will pass to or in further trust for the children free of estate tax at the surviving spouse's death.

Massachusetts adopted both the Uniform Probate Code and the Uniform Trust Code in 2012, so for most people in Massachusetts there's no longer a need to create revocable trusts. I assume you created yours before 2012.
I had to file a MA estate tax return for my dad after he passed in 2013. There were marital and family trusts involved and I was quoted $5,000 to do the return for relatively simple assets - home, brokerage accounts, CDs, and an IRA. I decided to do the return myself. It took a few weeks of deciphering the instructions on the MA DOR website. A real oddity is that MA uses the 1999 federal estate tax return to figure out the MA estate tax owed. My return passed the DOR desk audit and I received a letter of acceptance 4 months after the return was filed. You have 9 months after DOD to file although you can get an extension if needed.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

Small Law Survivor
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Re: Massachusetts Estate Tax

Post by Small Law Survivor » Sun Nov 11, 2018 9:27 am

I live in Massachusetts also. I'd really appreciate a good resource that explained the Mass estate tax.

FBN2014
Posts: 465
Joined: Sat Mar 08, 2014 3:07 pm

Re: Massachusetts Estate Tax

Post by FBN2014 » Sun Nov 11, 2018 9:34 am

Small Law Survivor wrote:
Sun Nov 11, 2018 9:27 am
I live in Massachusetts also. I'd really appreciate a good resource that explained the Mass estate tax.
I have an article that was written several years ago by a MA estate planning attorney and was published on his website. Unfortunately he is now deceased. The article gives a detailed description of the MA law. I can share it with anyone who contacts me if that is considered ok with the forum administrator.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

RudyS
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Re: Massachusetts Estate Tax

Post by RudyS » Sun Nov 11, 2018 9:37 am

We plan to move to Massachusetts next year. This will be helpful in figuring out what we need to do to minimize eventual estate tax. I had thought we'd need some form of trust(s) but from what I see above there is no longer any need to do this. Is that right? We will of course see a lawyer to make sure wills, POA, etc., meet MA requirements but it'd be great to know in advance what we'd be looking at in terms of trusts.

FBN2014, does that article you mention include info before or after the 2012 event that bsteiner referred to?

FBN2014
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Re: Massachusetts Estate Tax

Post by FBN2014 » Sun Nov 11, 2018 9:44 am

RudyS wrote:
Sun Nov 11, 2018 9:37 am
We plan to move to Massachusetts next year. This will be helpful in figuring out what we need to do to minimize eventual estate tax. I had thought we'd need some form of trust(s) but from what I see above there is no longer any need to do this. Is that right? We will of course see a lawyer to make sure wills, POA, etc., meet MA requirements but it'd be great to know in advance what we'd be looking at in terms of trusts.

FBN2014, does that article you mention include info before or after the 2012 event that bsteiner referred to?
I am not an attorney so I would never give anyone legal advice. I can only speak from my own experience. I can tell you that the MA estate tax is different than the federal system with a $1 million exemption. So if your estate is over that amount then it makes sense to consult an attorney to explore ways to minimize your exposure. Yes, the article was post 2012.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

bsteiner
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Re: Massachusetts Estate Tax

Post by bsteiner » Sun Nov 11, 2018 10:48 am

FBN2014 wrote:
Sat Nov 10, 2018 11:56 pm
...
I had to file a MA estate tax return for my dad after he passed in 2013. There were marital and family trusts involved and I was quoted $5,000 to do the return for relatively simple assets - home, brokerage accounts, CDs, and an IRA. ...
In estates where an estate tax return is needed (or filed to elect portability) it's usually the central focus of the estate administration. The cost will vary considerably from one case to another. It's less expensive if the estate consists of marketable securities, though you still have to obtain the value of each security.
Small Law Survivor wrote:
Sun Nov 11, 2018 9:27 am
I live in Massachusetts also. I'd really appreciate a good resource that explained the Mass estate tax.
The Massachusetts estate tax is equal to the old state death tax credit, as if the Federal exclusion amount were $1 million. Massachusetts allows a state-only QTIP election. So the Will of a married person in Massachusetts might have a $1 million credit shelter trust, a gap trust in QTIP form for the difference between the $1 million Massachusetts exclusion amount and the Federal exclusion amount (for which the estate would elect QTIP for state but not Federal estate tax purposes) and then the rest to the spouse outright or in a QTIP trust. Alternatively, with portability, everything above $1 million might go to the spouse outright or in a QTIP trust for which the state would claim the marital deduction for both Federal and state purposes, to get a second basis step-up at the surviving spouse's death.

There are several other states with similar estate tax regimes (a state exclusion amount lower than the Federal, and allowing state-only QTIP elections).

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