Dear Clients, Colleagues, and Friends:

We are pleased to report that yesterday, the Commonwealth of Massachusetts passed a law increasing the estate tax exemption from $1 million to $2 million. This is the first increase in the exemption since 2006. Important points for you to know are as follows:

• This tax law change applies to you if you are a Massachusetts resident. In the past, $1 million was exempt from estate tax. However, it was a so-called “cliff” tax so that if you had $1.00 in excess of $1 million, you were taxed on the entire amount.  The new law establishes a true exemption. The first $2 million is exempt, and a person dying as a Massachusetts resident is only taxed at death on amounts in excess of $2 million.
• There still is an unlimited marital exemption so that the spouse is not taxed on assets he or she receives outright or in a qualifying marital trust.
• Like Rhode Island, the Massachusetts exemption does not have a “portability“ feature. This means that this exemption is either used at the death of the first spouse or it is lost.
• The $2 million exemption is not indexed for inflation.
• The new law is retroactive to January 1, 2023. This means that estates of Massachusetts residents who died during calendar year 2023 can take advantage of the increased exemption.
• What this law change means to you:
  • If you are not a Massachusetts resident, this increase does not apply to you. We sent you this email informing you of this change nonetheless so you are aware of estate tax changes in a neighboring State.
  • If you are a single Massachusetts resident, you don’t need to change anything. This exemption will benefit you automatically.
  • If you are a married Massachusetts resident, now is a good time to examine how you have funded either your joint trust or your individual trust. In the past, our goal was to fund these at least to the $1 million level to take full advantage of the Massachusetts exemption. Now, we suggest that if possible, these trusts be funded to the level of $2 million to take full advantage of this new exemption.
  • If you have questions regarding trust funding or otherwise with respect to your planning, please schedule a call or appointment with one of our estate planning attorneys.