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Massachusetts residents need to take into consideration taxes and how they will affect their heirs. The threshold for the Massachusetts Estate Tax is currently set at 1 million dollars. Many residents dismiss this concern out of hand because they do not consider themselves particularly wealthy. However, many people do not realize that this 1-million-dollar threshold includes the value of ALL assets that you own on the date of your death, including but not limited to your home, your retirement accounts, your brokerage accounts, your bank accounts, life insurance policies payable upon your death, and even your personal tangible property such as furniture, clothes, and jewelry.
This tax applies to the entire estate, not just the amount above the exemption. Therefore, if your estate is worth $1.2 million, the tax applies to the entire $1.2 million, not just the $200,000 over the exemption. The chart below shows how the tax brackets work and how to calculate the approximate amount your estate will have to pay. In order to use the chart you take you find the row where your estate is valued more than the amount in Column A but less than the amount in Column B, you then subtract the amount in Column A from your estate value, and multiply that by the percentage in Column D, you then add that number onto the amount in Column C, and you have the estate tax that would be due.
Column A Taxable Estate Amount Over | Column B Taxable Estate Amount Not Over | Column C Tax on amount in Column A | Column D Rate of tax on excess over amount in Column A |
| $1 | $40,000 | $0 | 0% |
| $40,000 | $90,000 | $0 | .8% |
| $90,000 | $140,000 | $400 | 1.6% |
| $140,000 | $240,000 | $1,200 | 2.4% |
| $240,000 | $440,000 | $3,600 | 3.2% |
| $440,000 | $640,000 | $10,000 | 4.0% |
| $640,000 | $840,000 | $18,000 | 4.8% |
| $840,000 | $1.04 million | $27,600 | 5.6% |
| $1.04 million | $1.54 million | $38,800 | 6.4% |
| $1.54 million | $2.04 million | $70,800 | 7.2% |
| $2.04 million | $2.54 million | $106,800 | 8.0% |
| $2.54 million | $3.04 million | $146,800 | 8.8% |
| $3.04 million | $3.54 million | $190,800 | 9.6% |
| $3.54 million | $4.04 million | $238,800 | 10.4% |
| $4.04 million | $5.04 million | $290,800 | 11.2% |
| $5.04 million | $6.04 million | $402,800 | 12% |
| $6.04 million | $7.04 million | $522,800 | 12.8% |
| $7.04 million | $8.04 million | $650,800 | 13.6% |
| $8.04 million | $9.04 million | $786,800 | 14.4% |
| $9.04 million | $10.04 million | $930,800 | 15.2% |
| $10.04 million | ------------------- | $1,082,800 | 16.0% |
As an example, for an estate of $1.75 million, we would use row 10 and subtract the $1.54 million in Column A to get $221,000, then multiply that by 7.2% in Column D which gives us a value of $15,912, which we would then add onto $70,800 in Column C to give us an estate tax due of $86,712 for an estate size of 1.75 million.
There is a way for married couples to effectively double their Massachusetts Estate Tax exemption of 1 million dollars to 2 million dollars by using a Revocable Living Trust. Additionally, out of state residents who own real estate in Massachusetts are still liable to have the estate tax levied against them because Massachusetts attaches the estate tax liability to the real property owned within the state’s borders. In order to get around this, out of state residents need to discuss with an attorney whether they can utilize a Trust, Limited Liability Company, or other business entity to shield themselves from the tax.
Finally, even if the estate is worth less than $1 million, if the decedent made taxable gifts during their lifetime, they are added onto the value of the estate for calculation purposes. Therefore, if the decedent’s estate is only worth $900,000 on their date of death, but they filed $200,000 worth of taxable gifts over their lifetime via a Form-709, thus making their estate plus lifetime taxable gifts a total of 1.1 million. Then, the Massachusetts estate tax will be levied against only the $900,000 estate based on the chart above, even though it is under the exemption on the date of death.