It is an unfortunate truth that everyone in Massachusetts is going to lose a loved one at some point. The most anyone can hope for is that the loss comes when that loved one has lived a long and happy life. Dealing with the assets that person left behind through the probate process can seem trivial in the midst of grieving, but it is something that has to be done.
One of the major issues that will arise during this process is taxes. Both states and the IRS may be entitled to their share of a loved one’s estate. Unfortunately, there are many people who don’t adequately plan for the tax ramifications when drawing up an estate plan. Some believe that since their estate is below the federal estate tax threshold of $5.25 million that there is no need to worry about taxes. Regrettably, that amount may not be the threshold here in Massachusetts.
The value of the assets given to each heir or beneficiary may be greatly different once taxes are taken out based on the asset’s value. But that isn’t the only impediment to the value of the asset. Different assets garner different tax treatment. A life insurance policy and a retirement account will be treated very differently.
When people draw up their estate plans, they don’t always consider how the tax issue will play out during the probate process. Having someone knowledgeable in estate tax can be helpful both before a loved dies and after. If tax considerations weren’t properly handled during in the estate plan, then the family may require help sorting out the issue during probate.
Source: Chicago Tribune, ” Plan now to avoid inheriting a tax mess,” Amy Feldman, Aug. 8, 2013