Massachusetts Estate Tax: How to Minimize Your Family's Burden

Massachusetts Estate Tax: How to Minimize Your Family's Burden

Massachusetts has one of the lowest estate tax thresholds in America—and it’s costing families millions each year.

Current Massachusetts Estate Tax Threshold

2025 threshold: $2 million (significantly lower than the federal exemption)
Tax rate: Progressive, up to 16%
Cliff effect: If your estate exceeds $2 million, the entire estate becomes taxable, not just the amount over the threshold. This can result in a much larger tax bill than many expect.

Real-World Impact Examples

$3 million estate: May owe approximately $100,000 in Massachusetts estate tax
$5 million estate: May owe approximately $300,000 in Massachusetts estate tax

Note: These are rough estimates. The actual tax owed depends on deductions, the composition of the estate, and any changes in state law. Estates with illiquid assets (like real estate or family businesses) may face additional challenges in paying the tax.

Massachusetts-Specific Planning Strategies

• Credit shelter trusts: Married couples can use these trusts to maximize both spouses’ exemptions, potentially doubling the amount shielded from estate tax. However, this requires careful planning and proper trust drafting.

• Gifting strategies: You can reduce your taxable estate by making gifts during your lifetime. Massachusetts does not have a gift tax, but large gifts may have federal gift tax consequences. Annual exclusion gifts (up to $18,000 per recipient in 2025) are a common way to transfer wealth gradually.

• Life insurance trusts: Placing life insurance in an irrevocable trust can keep the policy’s proceeds out of your taxable estate. This strategy must be set up correctly and well in advance of death to be effective.

Don’t let Massachusetts’ estate tax take a large portion of your family’s inheritance. Early planning can make a significant difference.

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Disclaimer: This blog post provides general information and is not legal advice. Estate planning outcomes can vary widely based on your personal circumstances and the evidence available. For decisions about your own estate, always consider your unique situation and keep up to date with changes in Massachusetts law.