Page 24 - BusinessWest February 7, 2022
P. 24

Estate Tax in Massachusetts
The $1 Million Exemption Level Is Among the Lowest in the Country
By Barbara Trombley
Did you ever wonder why all of your Massachusetts neighbors move to Florida when they retire? And they make sure they
spend six months and a day at their southern address?
Of course, the warm winter weather in sunny Florida is a draw. But another reason many people
in Massachusetts change their state residence is to avoid the Massachusetts estate tax, which is levied on estates valued over $1 million. Given the value of real estate and 401(k) plans in Massachusetts, it is not that hard to pass this threshold for many middle- class people.
Surprisingly, the federal estate tax is $12.06 mil- lion per person in 2022. Also, it is portable between spouses. With the correct steps, a married couple can protect $24.12 million after the death of both spouses in 2022. Our state estate tax is shockingly different. Of the 18 states with an estate or inheri- tance tax, Massachusetts and Oregon have the low- est exemption level of $1 million.
Also, the Massachusetts estate tax has a regres- sive feature where, if you die with an estate valued at $1,000,001 or more, your heirs will pay a graduated tax starting at the first dollar over $40,000 (which is
a small exclusion). The bill on a $1 million estate is about $40,000. The tax rate is a graduated one and rises from 0.8% to 16% depending on the size of the estate. The heirs of an estate worth $3 million could find themselves with a tax bill approaching $200,000.
Massachusetts is shockingly out of step with the nation and with the rest of New England. Maine, Connecticut, and Vermont all have exclusions of more than $5 million, and New Hampshire does not have an inheritance tax at all. Until our legislators raise the exemption to keep up with inflation and make the exemption
a true one, residents will continue to flee the state or jump through hoops to help their heirs avoid the tax.
What is included in your estate? Bank
accounts, real estate, retirement accounts, life-insurance proceeds, vehicles, etc.
Upon the death of the first spouse, no tax
is owed. It is upon the death of the last remaining spouse that the dollar amount of assets is counted and an estate tax will need to be filed if the total value exceeds $1 million. The return must be filed, and any tax must be paid nine months after the death. The state may grant an extension of time, but interest will accrue on any unpaid amounts past the due date.
What can be done to mitigate the tax if the laws don’t change? Perhaps you retitle the ownership of your house to a trust or to an adult child to remove it from your estate. Each spouse can also set up a trust to shelter $1 million upon their death. This keeps the funds out of their estate but available to the surviv- ing spouse to use if set up correctly.
“The tax rate is a gradu- ated one and rises from 0.8% to 16% depending on the size of the estate. The heirs of an estate worth $3 million could find themselves with a
      tax bill approaching $200,000.”
  Cash and other assets can be gifted to reduce an estate, but be careful about capital gains or tax owed on retirement funds. Charitable contributions can also be made to reduce the size of the estate. Many retirees move to a tax-friendly state, like Florida, and become residents. Working with a qualified financial planner and an estate attorney is imperative to miti- gate the estate tax. u
Barbara Trombley is a financial advisor and CPA with Wilbraham-based Trombley, CPA; (413) 596- 6992. Securities offered through LPL Financial. Member FINRA/SIPC. Advisory services offered through Trombley Associates, a registered investment advisor and separate entity from LPL Financial.
   Now for Something Revolutionary:
Perks & Priority Service Regardless of Your Income or Savings
 To learn more contact:
Jason Niles
MyBanker, NMLS #763668
413.449.4697 [email protected]
  has
Leveled the Playing Field for Everyone
 One point of contact catering to you Maps your journey
Make more out of your money Provides personalized service
 Banking products are provided by Berkshire Bank: Member FDIC. Equal Housing Lender. MyBanker priority service and perks are dependent upon a full fifinancial relationship commitment and may vary per individual. Non-relationship clients may be transferred to a traditional branch service delivery channel. Rev.041/1292
   24 FEBRUARY 7, 2022
BANKING & FINANCE
BusinessWest
































































   22   23   24   25   26