How to Prepare for Massachusetts Estate Taxes
Massachusetts Estate Tax: How to Prepare if You Have a Taxable EstateFor many families, a properly crafted estate plan can shelter all or most of your assets from tax. In other cases, your assets may be substantial enough that estate planning alone cannot eliminate the tax burden entirely.
If you have done all of the things in your estate plan to minimize your Massachusetts estate tax liability, but still have taxable assets worth over $2 million, there are some things you should know and steps you can take to ease the burden on your loved ones. |
We're Here to Help.OR
|
Estate Tax Logistics: When Taxes Are Due
If you have a taxable estate (meaning your taxable assets are worth over $2 million), the estate tax return must be filed and the taxes paid within nine months of death.
This is a shorter time than many people realize, and it can go by very quickly as a family is trying to do all of the things that need to be done to organize and settle an estate.
Importantly, it is also a deadline that occurs before the estate is finally settled, and sometimes only shortly after there has even been an appointment of a Personal Representative (executor) to manage the assets of the estate.
This can leave families scrambling to figure out the best way to get cash out of the estate to pay the tax bill in order to avoid late penalties and interest.
This is a shorter time than many people realize, and it can go by very quickly as a family is trying to do all of the things that need to be done to organize and settle an estate.
Importantly, it is also a deadline that occurs before the estate is finally settled, and sometimes only shortly after there has even been an appointment of a Personal Representative (executor) to manage the assets of the estate.
This can leave families scrambling to figure out the best way to get cash out of the estate to pay the tax bill in order to avoid late penalties and interest.
Estate Taxes: Unintended Forced Sale of Property
Often the major asset that is in the probate estate is real estate: the family home, a farm, or vacation or investment property. The value of this property counts for tax purposes but it may not be your intent that it be sold upon your death.
However, if the estate owes taxes and there are no liquid assets in the estate, this may be exactly what happens.
However, if the estate owes taxes and there are no liquid assets in the estate, this may be exactly what happens.
The Importance of Liquid Assets in Your Estate
Your full estate may include a combination of liquid assets (cash, stocks and bonds, life insurance proceeds) and real property. The thing you have to remember, though, is that many if not all of your liquid assets, though they are counted for tax purposes and taxed, pass outside of your probate estate.
For example: life insurance proceeds pay out directly to the beneficiaries without going through the estate account. If you have designated beneficiaries on your investment accounts, those will be transferred directly as well.
What this means is that you may have left plenty of liquid assets to take care of the estate tax, but they are not under the control of the estate.
For example: life insurance proceeds pay out directly to the beneficiaries without going through the estate account. If you have designated beneficiaries on your investment accounts, those will be transferred directly as well.
What this means is that you may have left plenty of liquid assets to take care of the estate tax, but they are not under the control of the estate.
Practical Steps to Help Handle Estate Taxes
Assuming you have already done everything you can to minimize your estate tax liability, here are some additional practical steps you could consider:
- Taking out a life insurance policy with proceeds payable to your estate to provide cash for taxes and expenses (remember that these proceeds too will be counted in your taxable estate in most cases);
- Making sure some amount of cash or other liquid assets goes into your probate estate- this can be done by simply not having designated beneficiaries on certain accounts.
Meet Our Estate Planning Lawyers
Emily Smith-Lee is the owner and founder of slnlaw. She is a 1996 graduate of Boston College Law School. She was previously a partner at the Boston office of a large international firm, where she worked for thirteen years before starting the firm that became slnlaw in 2009. She has been recognized as Massachusetts Superlawyer each year since 2013, and in 2018 earned recognition as one of Massachusetts Lawyers Weekly's Lawyers of the Year.
Jenna Ordway: Jenna is a 2013 graduate of Quinnipiac Law School, and also earned an LLM in Taxation from Boston University in 2015. She has been affiliated with slnlaw since 2011, first as a law clerk and then as an attorney. Jenna has been recognized since 2019 as a "Rising Star" by Massachusetts Superlawyers. Jenna wrote a book on estate planning: The Road to Peace of Mind: What You Need to Know About Estate Planning. Jenna has helped many individuals and families with planning to protect their legacies and loved ones, and planning for the future and succession of their businesses.
Sharleen Tinnin: Sharleen is a 2010 graduate of Northeastern University School of Law, and earned her LLM in estate planning from Western New England Scool of Law in 2016. She has been with slnlaw since 2023. Prior to joining slnlaw, she worked with King, Tilden, McEttrick & Brink, P.C. on complex civil litigation matters. She previously worked for the United States Department of Justice, and received an "Excellence in Justice" award in 2017. Sharleen has helped many clients with planning for their legacies and their future, and navigating the probate process in Massachusetts after the death of a loved one.
How We 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.
|
|
|
|
|
