Estate Taxes

Estate Taxes, commonly known as Death Taxes, can take a huge bite out of your estate.  Many clients are rightly concerned about the effects of estate taxation on the value of their property, but few people are aware of exactly how these complicated taxes work. 

Basically, the State and Federal governments allow you to pass a set amount of property to your heirs (other than your spouse, who inherits tax-free) at your death without incurring an estate tax.  This is called the “exemption amount”.  The exemption amount changes depending upon on the year in which you die.  In 2009, the federal exemption amount was $3.5 million, meaning that people who died in 2009 could pass $3.5 million to their heirs without being taxed.  In 2010, due to a glitch in the current law, there is no limit to the amount your heirs can inherit tax-free (this is expected to change).  In 2011, the Federal exemption amount drops down to $1 million. 

Massachusetts also has an estate tax, and the threshold for Massachusetts residents is $1 million.

Depending on your net worth at your death, your estate could be subject to both federal and Massachusetts estate taxes. Currently, the top federal estate tax rate is 46% and the top Massachusetts rate is 12%.

If you have a taxable estate, we can minimize the effect of estate taxes through the use of various estate planning tools such as Credit Shelter Trusts.  We can also help you to reduce the size of your gross taxable estate while you are still alive, and we can work with you and your family to produce a plan that not only avoids estate taxes but keeps your family comfortable after you are gone.