Asset Management

Tax Guidance

Estate Tax Minimization

The federal estate tax – Form 706 is the US estate tax return. This form must be filed for the estate of every citizen or resident of the US whose gross estate exceeds the exemption amount on the date of death. The exemption amount in 2022 is $12,060,000. While this figure is well beyond most estates, it is set to decrease to $5,700,000 in 2026 which puts more estates into taxable range.

The Massachusetts estate tax – The Massachusetts estate tax exemption remains at $1,000,000. The Massachusetts estate tax applies to all estates of residents domiciled in Massachusetts at their time of death in excess of $1 million in value. This is based on the decedent’s gross estate so a large portion of the state’s residents will be exposed if no action is taken.

Marital deduction planning and portability – There is an unlimited marital deduction for property that passes to a surviving spouse. The deduction acts as a deferral of the estate tax, as the property interest will be taxed in the surviving spouse’s estate. The federal estate tax exemption is portable while the Massachusetts exemption is not. With proper trust planning, estate tax can be reduced/avoided through estate tax exemption optimization.

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