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The Heritage Law Center, LLC Blog

Out-of-State Real Estate and the New Massachusetts Estate Tax Law

POSTED ON: January 24, 2024

We previously wrote an article about the Massachusetts estate tax exemption increasing from $1M (million) to $2M for people dying on or after January 1, 2023. Something else changed under that new law that affects how out-of-state real estate is treated when it comes to Massachusetts estate taxes.

Previously, if a Massachusetts resident owned real estate outside of Massachusetts, when they died that real estate wasn’t included in the calculation of the deceased person’s estate value. The new law says that out-of-state property will now be included in the calculation of a decedent’s estate value. So, if all the estate’s assets, including the out-of-state real estate, add up to over the $2M threshold, a Massachusetts estate tax will be incurred. However, the estate tax will be reduced in proportion to the amount of the estate that is located outside of Massachusetts.

An example under the old law: Let’s say Harold was a Massachusetts resident who passed away in 2022. His assets, which included bank accounts, investments, a home in Reading, MA, and life insurance proceeds, totaled $825,000. He also owned a house in New Hampshire worth $220,000. In 2022, if the estate came in even a dollar over the $1 million threshold, it would have been taxed. However, since the New Hampshire home didn’t count toward the Massachusetts estate tax exemption threshold in 2022, no estate taxes were incurred.

An example under the new law: Charlie passed away in December 2023. His assets in Massachusetts included bank accounts, retirement plans, and two properties in Massachusetts, which totaled $1.8M. He also owned a home in Florida worth $500,000. Since the Florida property is now added to the $1.8M, the estate’s assets are $2.3M…over the $2M estate tax exemption amount. The result is the  amount over the $2M will be taxed. However, keep in mind the estate tax owed will be reduced proportionately by the value of the Florida property.

It’s essential to consider how the Massachusetts laws will impact your estate planning. As an experienced estate planning attorney, I can help you develop a personalized plan that minimizes your Massachusetts estate taxes, allowing you to leave more to your loved ones. Contact us today!