The estate tax, for most clients, only arises when a person dies. If your estate for estate tax purposes is over the exemption amount when you die, estate tax may need to be paid. There is a Federal estate tax and a Massachusetts estate tax. The general scheme of both the Federal and Massachusetts estate tax includes a $1,000,000 estate tax exemption.

In order to determine if there is a potential estate tax liability, total your assets, including real estate, life insurance, bank accounts, retirement accounts and other assets (we suggest that couples look at their combined assets). If the total is over the exemption amount, then a Federal estate tax may be imposed at a rate of 55%. The Massachusetts estate tax rates range from 6 to 16%.

The Federal estate tax law was changed on December 17, 2010. In practical terms, it is probably more important to understand what the law did not change (“the general scheme” discussed above) rather than what it does change, as the changes are only effective for the next two years. The estate tax changes, which apply from January 1, 2010 through December 31, 2012, include the following:

  • An estate tax exemption of $5,000,000 (although there is an election available to opt out of the estate tax for 2010 decedents)

  • Lower estate tax rates (35%)

  • Portability of unused exemption between spouses who both die between January 1, 2011 and December 31, 2012, where the required election is made following the death of the first spouse.

Changes in tax law tend to trigger an estate plan review, which can be beneficial. We suggest that you review your assets to determine if there is a potential estate tax liability, as discussed above. Even if estate taxes do not appear to be an issue for you, a review of your estate plan (or planning to create your first estate plan) is advisable. Everyone should have 3 basic documents: a Will, a Durable Power of Attorney, and a Health Care Proxy.

If you have questions about the impact of the Federal estate tax law changes or would like to schedule an appointment to initiate or review your estate plan, please contact Attorney Joanne Craig directly at 617-964-1300, extension 115, or email craig@tennant-ewer.com.

Click here to read the text of the federal legislation: The New Federal Estate Tax Law (2010)