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Understanding Massachusetts's estate tax filing requirements

While the rather cynical quote attributed to Founding Father Benjamin Franklin regarding the certainty of death and taxes is incredibly popular -- it can be found emblazoned on everything from coffee cups to t-shirts -- it's also incredibly accurate nearly 200 years later.

Indeed, one needn't look any further than the code books here in Massachusetts, as our state levies an estate tax on a deceased person's assets before they can be distributed among heirs. Specifically, the person appointed to serve as the personal representative of an estate must file what is known a Massachusetts Estate Tax Return -- Form M-706 -- if the gross value of the estate exceeds the applicable exclusion amount in the Internal Revenue Code then in effect and make any necessary tax payment.

This naturally raises the question as to what exactly can happen if the personal representative is late with the M-706 and the accompanying payment, which state law dictates must be filed by the personal representative within nine months of the passing of the decedent.

Consider the following answer:

  • A late payment penalty: A penalty of one percent per month (up to a maximum of 25 percent) of the tax payment recorded as due will be assessed.
  • A late filing penalty: A penalty of one percent per month (up to a maximum of 25 percent) of the tax payment ultimately determined to be due will be assessed.
  • Interest: An interest rate for underpayment of state taxes that is equal to the federal short-term rate plus four percentage points will be assessed and compounded daily.
  • Lien: A Certificate Releasing Massachusetts Estate Tax Lien (Form M-792) will not be issued in the event of a late filing, meaning any real estate owned by the decedent cannot be sold or otherwise transferred owing to the absence of clear title.

We'll continue this discussion in our next post, exploring the degree to which state law permits extensions of the nine-month filing period …

If you have questions or concerns relating to estate taxes or would like to learn more about estate planning, consider speaking with an experienced legal professional.    

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