Southeastern Massachusetts Lawyers Helping to Avoid Massachusetts Estate Tax for Non-Residents

A popular choice for many families to reduce or avoid MA estate tax altogether is to have a change of residency. Many choose Florida for its warmer climate and absence of income taxes along with a real estate tax reduction for residents and seniors.

Avoid MA Estate Tax: What Steps Can a Non-Resident Take?

Many out-of-state residents believe that being free of the Massachusetts income tax also means that they are no longer subject to the MA Estate Tax. That is an incorrect assumption in most cases. Anyone who owns tangible property or real estate in the state of Massachusetts is responsible for paying estate taxes.

However, with proper planning, out-of-state residents may be able to avoid paying the MA estate tax. A knowledgeable estate lawyer can help you strategically plan for this goal. Let’s take a look at some of the most popular options non-residents may choose.

Change What You Own and How You Own It

The key to avoiding estate taxes in MA is not owning tangible property under your name in the state’s territory. That does not mean you need to get rid of your Cape Cod house or pass it on to your kids. There are still ways you can enjoy your property and spare your beneficiaries from paying estate taxes when you are an out-of-state resident.

Typically, people believe that transferring their assets to a revocable living trust is enough to avoid estate taxes. While that still provides you with many benefits, such as probate avoidance, any estate added to a revocable living trust is still part of your taxable estate, and therefore still subject to the Massachusetts Estate Law. There are, however, a few different types of trusts that may help you and your surviving spouse to avoid the MA estate tax.

Some couples choose to have a joint trust in order to shelter their Massachusetts real estate from paying estate taxes. This option may also work for those who choose to convert their separate trusts into a joint trust. In MA, if one spouse dies before estate planning steps are taken, and the couple happens to own an estate larger than $1 million, they may end up wasting a significant exemption amount.

By establishing a joint trust with estate tax shelter provisions, the couple can reduce or, in many cases, eliminate MA estate taxes due upon the death of the second spouse. This approach only works for couples who do not wish to have separate trusts or are willing to convert their separate trusts into a joint one.

A common mistake made by non-Massachusetts attorneys is to use an “A/B” trust. Unfortunately, this will often result in an unnecessary estate tax due to the Commonwealth of Massachusetts at the death of the first spouse.

A properly structured and funded joint trust with A/B/C provisions can result in a complete elimination of the Massachusetts estate tax – even if the home is worth over $1 million! By allocating the Massachusetts real estate to the C Trust (the Massachusetts Credit Shelter Trust) at the first death the surviving spouse can still enjoy the Massachusetts property without “owning” it for MA estate tax purposes as long as the net date of death value of the MA real estate is less than $1,000,000.

Using an Irrevocable Trust to Avoid MA Estate Tax

Currently, the Massachusetts Estate Tax Exemption is $1 million. Those who own an estate worth less than that amount will not owe taxes on it, but in the case of a couple who owns assets including real estate in Massachusetts that are valued above $1 million, the surviving spouse will be subject to MA estate taxes upon his or her death.

In order to avoid that, another option some people choose is to transfer their assets into an irrevocable trust. By doing so, you transfer ownership of your property to the trust, and usually a spouse is assigned to have access to those assets after the death of the first spouse. Under the tax code, those assets belong to the trust and not to the surviving spouse. This may result in significant tax savings with proper planning.

Options for Investment Real Estate Owners in MA

Those who own investment properties in the state of MA may wish to consider organizing an LLC, or Limited Liability Company. Such an option brings numerous advantages, such as asset protection and potential income tax benefits. Most importantly, it helps avoid the Massachusetts Estate Tax.

Here’s how this works: an out-of-state owner can organize an LLC and then choose to transfer his or her MA real estate into the LLC. According to MA tax law, LLC shares are considered intangible property and are not subject to estate taxes. That makes the out-of-state resident no longer subject to estate taxes for property owned by the LLC.

Other Ways to Avoid MA Estate Tax – Choosing the Right One For You

The options outlined on this page are just some of the most common ways for non-residents to avoid MA estate tax. Depending on your particular case, other options may be available to you, such as Domestic Asset Protection Trusts (DAPTs), Spousal Access Trusts, Reverse Defective Grantor Trusts, MA Estate Tax Avoidance Trusts, QPRTs and Allocation or Sale to a Deceased Spouse’s Credit Shelter Trust. You should consider consulting a qualified Estate Planning Attorney to understand your options and choose the right one(s) for you.

At the Law Offices of Boyd & Boyd, we believe we can help you make the right choice for your family. Call us at (508) 775-7800.

Sara Waters

19:35 01 Nov 23

Keats is a wonderful lawyer and really knows his field. He and his staff have been delights to work with.

Pamela Gordon

11:18 19 Oct 23

We scheduled an appointment with Keats Boyd III after attending a free informational seminar which demonstrated his team’s depth of knowledge and experience in estate planning. Keats explained the law, risks and benefits of various estate plans for both our personal and business needs. No doubt, he was totally focused on our best interest. As we were preparing for an international trip, Keats and his team expeditiously prepared our documents before our departure. Everyone was extremely helpful during the entire process and we feel confident that we have a sensible and comprehensive estate plan. Highly recommend Boyd & Boyd.

Pam Hart

17:42 28 Sep 23

I went to a two hour seminar, whichI wish was all day. There was so much information. I was very impressed and am very excited to have my consultation.

Bob

19:51 09 Aug 23

Keats did a fantastic job in supporting our estate planning needs. They were immediately responsive and explained all we needed to know. Highly recommended.

Nelson Frew

23:35 06 Aug 23

We have worked with Keats for the last 18 years. He has helped us establish and understand the trusts we need to ensure the best for our sons, and has kept us updated and informed about the changing tax laws and guidelines. His complimentary review sessions have helped us to keep up to date as well. He has been kind, helpful, respectful, and, most importantly, completely knowledgeable about the changing estate planning world. We highly recommend him and his firm.

Elaine Gerlt

23:34 27 Jul 23

I first went to the three day seminar last year. I felt very overwhelmed and lost. After attending again this year, I feel much more confident in my trust decisions. Keats and Wendy have been very kind, supportive and caring during this difficult decision. I highly recommend Boyd & Boyd.

Tabetha Avtges

16:33 27 Jul 23

I just sat through 3 days of seminars Boyd & Boyd offers to help my parents. I was pleasantly surprised at the details Keats went into each day. Very thorough presentations. Took time to answer all questions. Highly recommend.

Edward Breen

19:14 25 Jul 23

Boyd & Boyd takes the time to walk you through the entire process of creating the trust that is best for you. They also have the ability to simply explain some very complicated issues- which gives you peace of mind.Their seminars are timely and very educational with regards to tax law and estate changes that have or about to take place. I highly recommend Boyd & Boyd.