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Understanding Estate Taxes
As part of its effort to balance the budget, the Massachusetts legislature decided not to follow the trend of the federal tax law and froze the state death tax credit as it stood in the year 2000. This means that as of January 1, 2003, the threshold for taxation became different for Massachusetts than for the federal estate taxes. Here are the limits under current law:
| Year |
Massachusetts |
Federal |
| 2005 |
$950,000 |
$1,500,000 |
| 2006 - 2008 |
$1,000,000 |
$2,000,000 |
| 2009 |
$1,000,000 |
$3,500,000 |
| 2010 |
$1,000,000 |
No tax |
| 2011 and thereafter |
$1,000,000 |
$1,000,000 |
The result is that for the foreseeable future, many estates may be subject to a Massachusetts estate tax while not subject to a federal estate tax. The good news is that the Massachusetts estate tax is a much lower rate than the federal estate tax,
approximately 4.8% to 16% as opposed to approximately 41% to 45%. The bad news is that anyone with an estate of more than $1 million, whether single or married, should have their estate plan reviewed to consider maximizing estate tax protection under the new law.
It is also important to note that the estate tax is calculated upon all assets (not just Probate assets) owned by an individual at the time of his/her death, including, but not limited to the following:
- Life Insurance & Annuities
- Real Estate
- Bank Accounts, CDs, and cash
- Stocks, Bonds & Mutual Funds
- Retirement Plans
- Tangible personal items (jewelry, artwork, antiques, collectables, etc.)
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