Massachusetts and Other States’ Estate Taxes

Massachusetts and Other States’ Estate Taxes Episode 255 – Massachusetts is one of twelve states with a state estate tax. Even though it just raised its state estate tax exemption amount from $1 million to $2 million, you don’t have to be ultra-wealthy to be subject to estate taxes, so plan now. More SML Planning Minute Podcast Episodes Transcript of Podcast Episode 255 Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, Massachusetts and Other States’ Estate Taxes. How often have you heard or read in mass media and news publications that the wealthy don’t pay enough in taxes? Part of the discussion focuses in on federal estate taxes because the federal estate tax exemption is currently extraordinarily high: $12.92 million per person for 2023 and anticipated to rise to about $13.61 million for 2024, due to inflation adjustments. That means that today, each person can give away during their lifetime, or at death, up to the federal exemption amount without federal estate tax consequences. In 2026, the federal exemption amount is scheduled to be cut in half so that will still be somewhere around $7 million. Even then, for the vast majority of people, they’re thinking: “So what, I’m not worth anywhere near that amount. This discussion is only relevant to the super-rich.” While that may be true on the federal level, remember that there are still twelve states that have their own state estate tax systems with much lower state exemption amounts. Those states are Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington, and the District of Columbia. Each state has its own state exemption amount ranging from $1 million to over $9 million. Each state also has its own estate tax rates with maximums ranging from 12% to 20%. This list does not include the six states that have an inheritance tax with varying exemption amounts and tax rates. Unlike the federal estate tax, an Inheritance tax is paid to a state by the person receiving the inherited money or property. As you can tell, you don’t have to be “super-rich” to have an estate tax issue if you happen to reside in one of these states at the time of your death. Other states may be contemplating an estate tax as a way to raise revenue. On October 4, 2023, Massachusetts passed a law that raised its state estate tax exemption from $1 million to $2 million, retroactively effective for those who die on or after January 1, 2023. The exemption amount had remained unchanged since 2006 and notably, the new exemption amount is not adjusted for inflation. If you’re thinking that the rise in the exemption is a benefit to the rich, remember also, however, that Massachusetts also has a Millionaire’s Tax that went into effect in 2023. Residents who have incomes over $1 million will be taxed an additional 4% on the portion of the annual income that exceeds $1 million. Massachusetts’ estate tax rate is based upon a sliding scale starting at 7.2% to a maximum of 16%, depending upon the size of the estate over the exemption amount. So, what’s the moral of this story?  Even if you’re not super-rich, but just moderately well-off, depending upon where you reside, you may still be subject to some estate taxes, and the key to minimizing or avoiding the taxes is planning. Contact your Security Mutual Life insurance advisor today to get the process started.  Your advisor will assemble your team and coordinate with your attorney and tax professional to review your situation and to determine the estate plan appropriate for you and your family. More SML Planning Minute Podcast Episodes This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. 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