LESSON #4 IN THE FREE 5-DAY EMAIL COURSE
Before we start Lesson #4, here's about the new MA Estate Tax law change, signed on October 4, 2023.
The Massachusetts Estate Tax law has changed. Our clients and others have questions. They have revocable living trusts with estate tax planning provisions. They want to know how the new law affects them. Here are some possible effects:
- The new law increases the amount of assets that can pass free of estate tax. The exemption is now $2 million per person, up from $1 million. It had been stuck for 20+ years.
This means that you may want to consider transferring more assets into your existing living trust, especially if you are married. The former $1 million is converted to a tax credit up to $99,000.
Many living revocable trusts have language than accomdates the higher limit. Essentially the first spouse can now shelter $2 million from the second spoue's estate. Think $2 Million first and $2 Million = $4 Million with revocable living trusts.
As is usual, if you have a trust that divides (after your death) your assets into two sub-trusts, you may need to review it. Are the beneficiaries the same, because a shift of trust terms occurs at $2 and not $1. Does your trust have different terms for under and over $1 Million? If so, that is you, most likely if you're married.
You may also need to check your beneficiary designations. You want to make sure they reflect your current wishes and goals. For example, you may have wanted to leave the old exemption amount to your children and the rest to your spouse. Now you may be leaving more to your children and less to your spouse. Like the overall trust situation.
- The new law also changes how the sub-trusts are funded. If you have a trust that uses a formula based on the exemption amount, you may need to change it. Or you may need to use a different method of funding the sub-trusts. You want each sub-trust to receive the appropriate amount of assets. For example, you may have a trust that uses a percentage of the exemption amount. Now one sub-trust may receive too much or too little assets.
- The new law does not affect the federal estate tax exemption. It remains at $12.9 million per person. This means that your estate may still be subject to Massachusetts estate tax, but not federal estate tax. This can happen if your estate is worth more than $2 million but less than $12.9 million. In this case, you may want to explore ways to reduce or avoid your state estate tax. Some ways are making lifetime gifts, creating irrevocable trusts, or moving to another state.
One way to reduce your state estate tax is to make lifetime gifts.
I'm Joel Bernstein, an estate planning attorney with over 30 years of experience. I use plain English to help you understand wills, trusts, and the other documents you need to protect your loved ones and your estate.
Most middle-aged people aren’t ready for their inevitable death. We make estate planning simple, affordable, and quick. So people can live in peace, knowing their affairs are in order.
"Let me outline in general the process we follow to avoid making inadvertent errors to your existing estate planning: