December 19, 2023

2023 Changes to the Massachusetts Estate Tax
On October 4, 2023, Massachusetts Governor Maura Healey signed a tax relief package which has had significant implications on Massachusetts estate tax law for Massachusetts residents and out-of-state residents with Massachusetts property.
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The new law amended Massachusetts estate tax by providing a credit of up to $99,600, which therefore eliminates estate tax for estates valued at $2 million or less and reduces the estate tax liability for estates valued at more than $2 million. Prior to this, the Massachusetts estate tax threshold had been $1 million since 2006.

How Estate Tax Works

The increased Massachusetts estate tax exemption now allows single individuals to pass on to heirs up to $2 million at date of death, estate tax-free. For married couples, additional planning will be required to maximize the applicable exclusion amount in each spouse’s estate. Unlike federal estate tax law, the unused portion of a spouse’s Massachusetts estate tax exemption cannot be transferred to the surviving spouse. Therefore, proper estate planning with an attorney is recommended. 

The $2 million valuation is calculated after deductions and expenses are taken out. Your gross estate calculation consists of valuing all the assets you own (in full or in part). This may include real estate, life insurance policies, trust assets, cash accounts, annuities, business interests and other assets.  Certain deductions may reduce your gross estate such as mortgages and debts, funeral and estate administration expenses, property passing to a surviving spouse or a charity, and other deductions.

Please note that the new law change does not affect the computation of the federal taxable estate. The current federal lifetime estate and gift tax exemption remains at $12.92 million per person. This will be reduced by approximately one half, however, in the beginning of 2026 when the Tax Cuts and Job Act is set to expire.

Retroactive to January 1, 2023

The new Massachusetts estate tax law is retroactive to January 1, 2023. Estates of 2023 decedents who have already filed a Massachusetts estate tax return may consider amending their return to take advantage of the increased exemption amount and a possible refund. For those estates who have a Massachusetts estate tax return that is currently due, an attorney may recommend placing the estate tax return on extension until further guidance and understanding of the new law is given.

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Out of State Residents with Massachusetts Property

Non-residents who own Massachusetts property, whether real estate or tangible personal property, will still be required to file a Massachusetts estate tax return under the new law. Essentially, a percentage of the Massachusetts property over the estate size is taken into consideration when calculating the applicable estate tax due. Further guidance from the Massachusetts Department of Revenue will be needed as to how the new credit will be applied to the ratio.

Next Steps

It is important to note that professionals in our field have varied interpretations of certain details in the reading of the law. While the general intent of the tax relief package is clear, we anticipate additional guidance from the Massachusetts Department of Revenue in the coming months.

It is especially important to consult with your estate planning attorney and provide an updated estimate of your total net worth when significant law changes such as this occur. An attorney will be able to determine if your existing estate planning documents are current or if new estate planning documents are required to account for the new Massachusetts estate tax law. An attorney can also assist a married couple with the proper planning to maximize the exclusion amount for each spouse’s estate. 

Have a question about estate planning for you and your loved ones? Cape Cod 5’s team of wealth management experts is here for you. Reach out to us today!

Lauren A. Kassira, Esq.
Wealth Management Officer

Lauren A. Kassira, Esq.Lauren joined Cape Cod 5’s Trust and Asset Management team in 2021. Prior to Cape Cod 5, she worked as an associate attorney specializing in trusts and estates. During this time, Lauren gained considerable experience in estate settlement, trust administration, and wealth management.
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