Massachusetts Estate Tax 2025: Key Changes You Need to Know

Massachusetts has made changes to estate tax laws in recent years. These changes impact families, business owners, and retirees. Understanding the Massachusetts estate tax can make a big difference in how you plan.

Massachusetts Estate Tax

The Massachusetts estate tax applies to the value of the deceased’s estate before assets are distributed to heirs. It can include real estate, bank accounts, and investments. State taxes can apply even if no federal tax is due. Only about 0.09% of estates were subject to federal estate taxes in 2023.

The total value of the assets determines if estate tax is owed. If it exceeds the tax exemption amount, taxes will be required. Strategic planning is essential for those with significant assets to preserve wealth for heirs. In recent years, the number of Massachusetts residents with millionaire status has increased significantly. Of the state’s population of over 7.1 million, the overall number of millionaires increased by 38.6% from 2022 to 2024.

Key Changes in Massachusetts Estate Tax for 2025

Massachusetts lawmakers have recently updated estate tax laws. This has gone in favor of middle-class families and small business owners.

Here are some of the significant changes:

• Increased exemption threshold. The exemption threshold for assets has moved from $1 million to $2 million. This change provides relief to families whose estates fell just above the limit. Now, estates under $2 million don’t have to pay estate taxes.
• Adjusted tax rates and brackets. Massachusetts uses a graduated tax rate system. This ranges from 0.8-16%. It depends on the size of the estate. These adjusted tax brackets offer a more gradual taxation amount based on the estate values.
• Potential federal implications. The federal tax exemption is high at $13.9 million. Estates over this would be subject to both state and federal taxes. However, only those between $2 million and $13.9 million are subject to Massachusetts state taxes.

Why Estate Planning Matters in Massachusetts

Even with the increased exemption, Massachusetts still imposes an estate tax. High property values, investments, and retirement savings can push you over the $2 million threshold.

Massachusetts estate tax planning lets you: 

• Reduce or eliminate estate tax liability. This can be done through trusts, gifts, and charitable donations.
• Protect family wealth by structuring ownership or beneficiaries effectively.
• Plan for liquidity. This way, heirs don’t have to sell assets quickly just to pay taxes.
• Avoid probate complications for a smooth transition of assets to heirs.

Each estate is unique. A Massachusetts estate tax planning attorney can create a tailored plan that fits your future goals.

Common Strategies for Estate Tax Planning

Estate tax laws can be complicated. However, there are ways to reduce your estate’s taxable value. 

• Lifetime giving. You can give assets to family members or trusts during your lifetime. This reduces the overall taxable value of your estate. These gifts can take advantage of annual exclusion limits or the federal lifetime gift exemption.
• Credit shelter trusts. This trust allows married couples to both use their estate tax exemptions, which can double the amount of wealth passed to heirs tax-free.
• Irrevocable life insurance trusts. Life insurance proceeds can be excluded from your taxable estate by transferring the policy into an irrevocable trust. Then, the death benefit isn’t counted toward the estate’s overall value.
• Charitable trusts and donations. Strategic charitable giving can reduce your taxable estate and still support causes that matter to you.
• Asset titling and ownership adjustments. Changes in how you title real estate and financial accounts can cause them to pass directly to beneficiaries.

Hire an Estate Tax Planning Lawyer

Albanese Law, LLC, has years of experience helping people protect their assets and reduce estate taxes. We have a deep knowledge of Massachusetts estate tax laws. Our team can help you create a plan that protects your long-term financial goals.

Our firm customizes every estate plan to reflect your financial situation and future plans. We make sure you understand your legal options and how your estate planning impacts estate taxation.

FAQs

How Much Can You Inherit Without Paying Taxes in MA?

Massachusetts imposes an estate tax, not an inheritance tax. This means that taxes are paid by the estate before beneficiaries can receive their share. Massachusetts’ estate tax exemption is $2 million. Estates below this amount do not owe estate tax. Estates above this amount, however, are subject to a tax of 0.8-16%. Federal estate taxes are separate from Massachusetts’ requirements and have a lower threshold.

Is There a Difference Between an Estate Tax and an Inheritance Tax?

There’s a difference between an estate tax and an inheritance tax. Estate tax is paid by the deceased person’s estate before assets are distributed to the heirs. It’s based on the total value of everything the individual owned at the time of death. This can include property, investments, and cash. An inheritance tax is paid by the beneficiaries who receive the inheritance. Massachusetts does not have an inheritance tax.

How Can I Avoid Paying Estate Tax in Massachusetts?

Avoiding or minimizing estate tax in Massachusetts requires strategic planning. This can include establishing irrevocable or marital trusts, making lifetime gifts under the gift tax exemption, and using charitable giving to reduce the taxable estate’s value. It’s important to update beneficiary designations and title assets jointly with the right of survivorship to help minimize or avoid estate tax.

At What Age Do You Stop Paying Real Estate Taxes in Massachusetts?

In Massachusetts, there isn’t a designated age at which residents automatically stop paying real estate taxes. However, there are cities and towns within the state that offer tax exemptions, deferrals, or reductions for older homeowners. Eligibility for these would depend on the person’s income, assets, and place of residency. Some homeowners can also defer paying taxes until selling their property.

Massachusetts Estate Tax Planning Lawyers

Contact Albanese Law, LLC, today to schedule a consultation. Whether you need to update an existing plan or create a new one, our team can guide you through the process. Let us help you navigate Massachusetts estate tax laws and secure your assets to provide for future generations.