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Do you know your responsibilities for estate tax planning?

Do you know your rights and responsibilities when it comes to planning for property taxes after death? Estate tax planning is not a minor issue. The fact is that too many Massachusetts residents' families suffer financial losses because benefactors do not properly prepare their estate before their departure. Knowing how much property you can exclude from the estate tax burden and figuring out how to maximize the amount your family is allowed to keep are key in promoting their financial success after your death.

Property transfer that occurs through an estate plan depends on an accurate valuation of a decedent's estate. If you do not know how much your property is worth, it is nearly impossible to tax. Massachusetts law requires beneficiaries to identify the "fair market value" for all property in the estate on the date of the decedent's death or within a six-month alternate valuation period. This information is critical for making sure that tax returns are filed legally within the state.

What types of property need to be evaluated under these requirements? Property that is considered part of the "gross estate" includes life insurance proceeds, annuities, the statutory estate of the surviving spouse, and other types of transfers (even some that were made during the decedent's life). In essence, the gross estate consists of all property in which the deceased person held any type of interest.

Furthermore, it is important to recognize that federal and state estate taxes are not the same. In Massachusetts, these requirements have been "decoupled," so you must know your responsibilities under both systems. This can easily become complicated and confusing, but do not worry! An experienced estate planning attorney can help you comply with both sets of rules, providing you with the support you need to execute the estate without paying federal estate tax.

Source: Mass.gov, "A Guide to Estate Taxes," accessed Feb. 23, 2017

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