Estate Tax Planning
Massachusetts imposes its own estate tax, separate from the federal tax, with a threshold that captures many ordinary families. With the right plan in place, that tax can often be significantly reduced or eliminated entirely.
The Massachusetts Estate Tax
Massachusetts is one of only a handful of states with its own estate tax. The Massachusetts estate tax exemption is $2 million. If the gross estate exceeds that figure, the tax is computed on the full taxable estate under a graduated rate table reaching 16%, not just on the amount above $2 million, and is then reduced by a credit of up to $99,600. Because that credit equals the tax that would fall on the first $2 million, an estate crossing the line by a modest margin owes only a modest amount, while the liability climbs steadily from there. With home values, retirement accounts, and life insurance factored in, many families who think of themselves as solidly middle class are surprised to learn they have an estate tax problem.
The federal estate tax exemption, by contrast, is currently $15 million per person (2026), made permanent under recent federal legislation. Families with larger estates still need to plan for both the Massachusetts and federal taxes, since the Massachusetts $2 million threshold is far lower and is not indexed for inflation.
Strategies That Reduce the Tax
Spousal planning and credit shelter trusts. Assets passing to a surviving spouse are not subject to estate tax at the first death, but without planning, that just defers the problem. A credit shelter trust (also called a bypass trust or B trust) captures the first spouse's Massachusetts exemption at death rather than losing it when everything passes outright to the survivor. This can save a married couple tens of thousands of dollars at the second death.
Annual gifting. You can give up to $19,000 per person per year (the 2026 annual exclusion) without using any of your lifetime exemption and without gift tax. A systematic gifting program over time can meaningfully reduce a taxable estate. Gifts made more than three years before death are also removed from the gross estate for Massachusetts purposes.
Irrevocable Life Insurance Trusts (ILITs). Life insurance proceeds are included in your taxable estate if you own the policy. An ILIT owns the policy instead, keeping the proceeds out of the estate while still making them available to provide liquidity for heirs to pay any estate tax owed.
Qualified Personal Residence Trusts (QPRTs). A QPRT transfers your home to a trust while you retain the right to live there for a term of years. After the term, the home passes to your heirs at a reduced gift tax value. This removes the appreciation that occurs during the trust term from both your estate and the gift.
Charitable strategies. Charitable bequests reduce the taxable estate dollar-for-dollar. Charitable trusts can accomplish the same while providing income during your lifetime.
The Massachusetts estate tax is assessed on the gross estate, meaning the value of everything you own at death, including retirement accounts, life insurance, and your home, before subtracting debts. Many families underestimate how quickly those figures add up. A review with an attorney costs very little compared to the potential tax exposure.
Plan Reviews Are Essential
Estate tax law changes frequently, and the plan that was right five years ago may not be optimal today. If your estate has grown, if the law has changed, or if family circumstances have shifted, a review with us can identify gaps and opportunities. We recommend revisiting your plan every three to five years, and any time there is a major change in your life or the law.