An estate tax places a limit on one’s ability to transfer property after their death. Proponents say this is necessary to raise revenue for the government and to keep a lid on the generational concentration of wealth in a small number of powerful families. Critics deride the practice as “the death tax,” and say it is unfair.
In recent years, the critics have held greater sway in the U.S. Congress. After a series of complicated changes in the law, in 2024 the federal estate applies only to estates valued at more than $13.61 million.
In other words, if an estate is worth less than $13.61 million, the federal estate tax does not apply at all. If an estate is worth more than $13.61 million, the federal estate tax kicks in with a series of tax brackets with increasing rates. The first $10,000 over $13.61 million is taxed at 18%, and the rate increases with each higher bracket.
Because that threshold is so high, the federal estate tax is a matter of concern only for the wealthiest families. It’s also important to note that it doesn’t apply in cases where a surviving spouse is inheriting an estate.
Massachusetts estate tax
You may have read the above and figured that you don’t have to worry about the federal estate tax when you are planning your estate. However, many states, including Massachusetts, have their own estate taxes, with much lower exclusion limits. The Massachusetts estate tax applies to estates worth more than $2 million.
This amount is higher than the value of most people’s estates, but if you own a home in an expensive market like the Boston area and have other valuable assets, the Massachusetts estate tax could apply to your estate.
Fortunately, there are estate planning strategies that can help you minimize your estate tax liability. By employing these strategies, you can maximize the legacy you leave to your loved ones.
