Massachusetts Doubles Estate Tax Exemption

It will also reduce the state estate tax on estates valued at more than $2 million by almost $100,000, according to attorneys Sara Wells, Laura Lerner and Matthew Tudino.

Unlike the federal estate tax exemption, the Massachusetts exemption “is not indexed for inflation and is not portable between spouses — that is, for married couples, the first spouse to die must use the Massachusetts estate tax exemption by passing assets worth $2 million to individuals other than the decedent’s spouse or to certain types of trusts for the benefit of the decedent’s spouse or other individuals, or that spouse’s exemption will be lost,” the Morgan Lewis attorneys state.

Further, “the value of real property and tangible personal property located outside of Massachusetts will be includible in a Massachusetts resident’s gross estate under the new law,” according to the attorneys.

“However, the amount of any estate tax due to Massachusetts will be reduced in proportion to the value that the non-Massachusetts situs assets bear to the total gross estate,” they wrote.

For instance, “if the estate tax due on a Massachusetts resident’s gross estate (including non-Massachusetts situs assets) is $100,000 and the non-Massachusetts situs assets make up 20% of the gross estate, the estate tax due will be reduced by 20% to $80,0000,” the attorneys relayed.

As the law was enacted on Oct. 4, the Massachusetts Department of Revenue “has not yet released revised estate tax forms and instructions,” the attorney state. “If an estate tax return for an individual who died this year has already been filed, a refund request should be filed based on the new $2 million exemption.”

For estate tax returns that are due in the coming weeks and months, “it may be prudent to file an extension while the Department of Revenue works on issuing revised forms,” the Morgan Lewis attorneys said.