When making estate plans, individuals should consider any estate tax liability. The estate may have to pay taxes on the federal and state levels.
In Massachusetts, there is an estate tax. Understanding the rules about this tax can help ensure the estate pays in accordance with the law.
Estate tax basics
The state levies estate taxes after the owner’s death. The amount of tax depends on the total value of the estate. Not all estates are subject to Massachusetts estate taxes, as there are certain exemptions and thresholds that determine whether an estate is taxable.
Tax threshold
As of 2024, estates with a total value of less than $1 million are not subject to estate taxes in Massachusetts. Estates exceeding that limit must pay a graduated tax rate that ranges from 0.8% to 16%.
The state determines the value of the estate by adding up the value of all the deceased’s assets that he or she owned at the time of death. This includes real estate, bank accounts, investments and retirement accounts. The state subtracts debts and liabilities from the total value to arrive at the taxable value.
Requirements for filing
The executor of the estate is responsible for filing the Massachusetts Estate Tax Return, Form M-706, with the Massachusetts Department of Revenue. The executor must file this form within nine months of the date of death. It is possible to request an extension of up to six months, if needed.
In addition to filing the estate tax return, the executor is also responsible for paying any estate taxes due. The payment of estate taxes comes from the assets of the estate. This may require the liquidation of assets if there is not enough cash available to cover the liability.
The executor must pay taxes before distributing any assets to the heirs. Due to this, heirs may receive a smaller inheritance than they might have expected if a significant portion of the estate goes to paying the tax.
