Inheritance Tax and Your Massachusetts Estate Plan

Understanding Estate Tax vs. Inheritance Tax in Massachusetts

Estate planning often involves navigating the complexities of estate tax, inheritance tax, and their implications. Let's clarify the differences and how they relate to Massachusetts residents:

Estate Tax vs. Inheritance Tax: The Basics

• Estate Tax: This tax is levied on the estate of a deceased person when the taxable assets exceed a predefined threshold (e.g., $1 million in Massachusetts).​​
• Inheritance Tax: In contrast, inheritance tax is paid by a beneficiary on the value of the inherited assets.

Massachusetts Estate Tax

• Massachusetts imposes an estate tax but does not have an inheritance tax.​​
• Estate tax is triggered when the deceased person's assets surpass the state's threshold, affecting the estate itself.

States with Inheritance Taxes

• Some states, including Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania, have laws imposing inheritance taxes.
• The specifics of these taxes vary, including the threshold amount that triggers taxation and exemptions for immediate family members (e.g., spouses and children).
• It's important to note that federal inheritance tax is generally not considered taxable income, and the tax is only levied by the state imposing it, not at the federal level.

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Impact on Massachusetts Residents

• Inheritance tax is determined by the state where the deceased person lived, not where the beneficiary resides.
• If you or a loved one is a Massachusetts resident at the time of death, you need not worry about inheritance tax issues in Massachusetts.
• However, if you receive an inheritance from a person residing in a state with inheritance tax laws (mentioned above), there may be a tax obligation in that state based on what you inherit.

Considerations for Your Massachusetts Estate Plan

• Generally, inheritance tax in other states does not affect Massachusetts residents, given the absence of such tax in Massachusetts.
• Nonetheless, estate and inheritance taxes can influence decisions made later in life, especially if you plan to relocate to another state.
• If you contemplate moving to a state with inheritance tax or for any other reason, it's wise to consult with an estate planning lawyer. They can help you assess how such a move may impact your current estate plan and whether updates are advisable.

How Our Estate Planning Lawyers Can Help

We are ready to help.  We understand this can be a difficult issue to tackle, so we have designed our process to make it as easy as possible for you to get the plan in place that protects you and your family and accomplishes your goals.  You can use the button below to schedule a free information call, or simply give us a call at  781-784-2322.

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