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Estate planning: 3 options for reducing Massachusetts estate tax

On Behalf of | Aug 17, 2021 | Estate Planning

As of 2021, the federal threshold for paying estate taxes for $11.7 million for single individuals or unmarried couples and $23.4 million for married people. However, the limit for Massachusetts is only $1 million dollars, so if your gross estate (including adjusted taxable gifts) exceeds this, there may be estate taxes on it after your passing.

If you know the value of your estate pushes it into this area and wish to ensure your heirs receive as much of their inheritance as possible, you have a few options.

1. Gift your assets to others during your life

You may gift up to $15,000 a year to a single individual without the present being subject to taxes. You may do this for as many people as you want each year. The recipient may be whoever you choose, including children, grandchildren and friends, and your spouse may do the same without affecting the amount you are able to gift to others tax-free.

2. Create a credit shelter trust

Also called a by-pass trust or A/B trust, this protects subsequent heirs of your spouse if said spouse survives you. Your marital partner receives the benefits of your estate after your decease without owing taxes due to an unlimited marital deduction. A credit shelter trust allows you and your spouse to shelter more of your collective estate for your inheritors (such as children and grandchildren) than you would otherwise be able to.

3. Donate to charitable organizations

Giving to charity reduces your taxable estate and any amount you give may be tax-deductible. You may donate as much as you wish to non-profit organizations every year.

By planning in advance and taking steps, you may considerably lower or even reduce the amount of taxes removed from your estate upon your passing.


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