Leaving a meaningful legacy for loved ones or specific charitable causes requires careful planning long before someone dies. Many adults in Massachusetts spend a great deal of time contemplating the impact they want to leave on the world after they die. They can then move to put together a comprehensive estate plan that will maximize what they will pass to the next generation.
Before the Massachusetts probate courts will allow the distribution of someone’s assets to their selected beneficiaries, the person tasked with estate administration will first have to settle the decedent’s financial responsibilities. That will include notifying and paying creditors and resolving all tax obligations. Estate taxes are among the most significant obligations that can diminish the value of someone’s estate and that must be taken under consideration as an individual crafts their estate plan.
There are both state and federal estate taxes
Although most states do not collect a separate estate tax from the one levied by the federal government, Massachusetts does. In fact, the threshold for estate taxes in Massachusetts is significantly lower than the current federal threshold.
An estate only needs to have property worth a total of $1,000,000 for it to be subject to taxation. At the federal level, at least in 2023, people only have to worry about estate taxes when the total value of their resources exceeds $12,920,000. The total value of the estate determines the tax rate, and higher-value estates typically need to pay more in taxes.
Owning a business or real estate might be enough to push someone’s personal property over that threshold. The taxes due after someone’s death could significantly diminish what their loved ones receive when they die, which is why advance planning is so important.
Tax minimization is a common estate planning goal
Provided that someone recognizes they are vulnerable to estate taxes, they can potentially avoid them or at least minimize them with the right estate planning documents. Some people make annual gifts to charitable causes and family members to diminish the value of their estate. Many others will move their biggest assets into trusts so that those assets will not have to pass through probate court after their death.
Learning more about estate tax rules and planning carefully can help people leave behind the meaningful legacy that they desire to pass along when they die.