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Boston Estate Lawyer

Estate planning is an important factor in ensuring all of your hard-earned savings are there to provide for your loved ones following your death.

When thinking about end-of-life planning, it’s best to be proactive so your family inherits all that they can without penalties. As of October 4, 2023, the Massachusetts estate tax exemption increased from $1M to $2M for people dying on or after January 1, 2023. When you die, if your estate is valued at $2M or under, your estate pays no estate tax. If it’s valued at one dollar over $2M, your estate is taxed on the amount over the $2M. The Massachusetts estate tax is a progressive rate of 7.2% to 16%.

You may not think that your assets will add up to $2M, but you may be surprised by the total. When you take the high value of real estate today and add in the value of assets like vehicles, life insurance proceeds, cash, retirement accounts, investments, and business interests, it can add up to more than you think.

The right estate planning strategy can protect your assets and ensure your loved ones are taken care of. With the price of real estate in Massachusetts soaring, many will have assets that exceed the estate tax threshold. Matthew Karr, Esq., at The Heritage Law Center is well-versed in Massachusetts law and is here to help you protect your loved ones from losing these funds. 

Gifting Your Assets 

You don’t have to wait until you pass away to give your loved ones a part of their inheritance. You can give valuables and cash away while you’re alive. However, there are set limits. 

For the federal gift tax, there’s a strict dollar amount that is set for yearly gifting of $18,000 (2024 amount). You can give up to that amount without having to report the gift or incur taxes on it. If you’re married, that amount is per person, which doubles the amount you can give away. Make sure you plan with your estate tax lawyer how to give away your assets without suffering penalties

Marital Deductions and Credit Shelter Trust

When you’re legally married and pass away, all your assets transfer to your spouse without being taxed. However, this transfer may put the survivor over the financial threshold for estate taxes

With a credit shelter trust, when the first spouse dies the assets are saved to a separate trust, isolating those funds so they don’t get taxed. When the surviving spouse passes, that trust’s assets pass to the beneficiaries without incurring estate tax. That can save your surviving loved ones a significant amount of money, leaving them with the funds to live comfortably and without the worry of losing this money to the Massachusetts estate tax. 

Charitable Donations

If you have a cause that’s dear to your heart, there’s no financial limit on charitable giving. There are many ways to give to charity to avoid the Massachusetts estate tax

Charitable Trust

You can donate now while you’re alive, leave a set amount to the charity upon your death, or set up a charitable remainder trust. This type of trust generates a potential income stream for you or other beneficiaries, and the remaining assets go to your favorite charities when you pass. 

Qualified Personal Residence Trust 

If you’re a homeowner, the value of your home may be a key part of your estate that puts you over the state estate tax threshold. To remove the value of your house from your estate tax valuation, you may need to place it in a qualified personal residence trust. 

This type of trust allows you to still live in your home for a set period of time while transferring the title to your house to a trust for your beneficiaries. Because the house is placed in a trust and is no longer part of your estate, the value of your estate decreases and may put you below this threshold. 

Grantor Retained Annuity Trust (GRAT) or Grantor Retained Unitrust (GRUT)

Certain assets, like stocks, produce income and may increase over time. That can push you over the estate tax limits if you don’t prepare with a grantor retained annuity trust (GRAT) or grantor retained unitrust (GRUT). 

When you place these assets in a GRAT or GRUT, these assets are no longer in your possession but continue to pay out an income to you. You may receive either a fixed amount (GRAT) or a percentage of the value of the assets (GRUT). 

Irrevocable Life Insurance Trust 

Life insurance can provide a safety net for your beneficiaries, but it can also add value to your estate, which may leave you paying estate taxes that reduce the value of your estate. 

An irrevocable life insurance trust removes a life insurance policy from your estate, which can help you maintain an estate worth less than $1 million. The proceeds for your policy can then be given to a beneficiary for financial support and can help pay any estate taxes if you’re still over this line. 

Generation-Skipping Trusts (GSTs) 

A generation-skipping trust skips a generation, so you can pass on assets to your grandchildren or even great-grandchildren. For high-net-worth people, this can help you reduce your estate significantly enough to avoid taxation and still provide for your family. 

Discuss Your Options with a Massachusetts Estate Tax Attorney

Knowing the best path to avoid Massachusetts estate tax can be tricky. You may be unsure what options are best for you. If you’re unsure, you can speak with Matthew Karr, Esq., about your options, and he can use his insight to guide you. More information is also available in our free report about saving on taxes

It takes a strong plan to live for today and prepare for tomorrow. Determining what your estate planning goals are with the help of our attorney sets you and your family up for a successful future. Regardless of the size of your estate and financial profile, protecting what you worked hard for and providing for your loved one takes planning, and we’re here to help with that plan.

There are many approaches you can take to avoid the Massachusetts estate tax. To determine what is right for you, contact The Heritage Law Center for a consultation. Call us at 617-299-6976 or complete the online form below.