Massachusetts’ taunting nickname Taxachusetts is pretty well earned. There are many levels of taxation that hit taxpayers in the Bay State, including income tax, property tax, sales tax, and estate tax. And the list goes on. This makes it an expensive place to live, more so, an expensive place to die.
Massachusetts is currently tied with Oregon for the lowest estate tax exemption in the country at $1 million. Currently, Governor Maura Healey and the state legislature are seeking to break that tie by raising the estate tax exemption. While there isn’t broad agreement, The Unger Company believes that when the dust settles, the state’s high net worth and ultra-high net worth families will be granted some relief.
Modernizing an estate tax code isn’t something that’s going to make a splashy headline on the front page of the Boston Globe, but it’s serious work that needs to be done. The competing plans to update both the exemption and some aspects of the law have been introduced under proposals and legislation that come under the broader heading “tax relief.” The governor’s proposal calls for the estate tax exemption to be raised to $3 million, while state lawmakers have a bill that will raise it to $2 million.
The other aspect of these pieces of legislation is an elimination of the “cliff.” As you may know from our recent article on New York’s estate tax, a cliff means that if the amount inherited exceeds the exemption by a certain amount, then the tax applies from the first dollar. This means that while a taxable estate of $999,999 would be exempt, a $1.05 million estate would have a bill from the state for $58,800 before applying credits and deductions.
We find real estate prices instructive. Boston is ranked as the sixth-most-expensive city in a recent piece by Rocket Mortgage, and Realtor.com reports that the median sale price for a home in the Boston area is $750,000, as of April 2023. That doesn’t leave a lot of headroom if you’re just a middle-class family planning wealth transfer.
As estate tax planning specialists for high-net-worth (HNW) and ultra-high-net-worth individuals (UHNWI), The Unger Company understands all too well how impactful and punishing estate taxes can be. When average families see their assets begin to bump into estate tax thresholds, there’s a bigger picture that needs to be paid attention to by people in these higher income classes.
The Unger Company finds the steps being taken in Massachusetts encouraging, and we always hope our clients will enjoy some savings via updated legislation, but there is still a big liability waiting for the next generation if wealth transfer is not carefully planned. Our founder Harold Unger is fond of saying, “You won’t get a thank you note for taxes paid.” It won’t come from the IRS nor the Massachusetts Department of Revenue. He has a soft spot for Massachusetts residents since he earned his J.D. and LL.M. from Boston University School of Law and its Graduate Tax Program.
The Unger Company, Ltd. is an experienced, learned voice in the area of estate tax planning and strategies. Using insurance and other strategies to build shelters, The Unger Company works to enable whole or near-whole wealth transfer to succeeding generations. Founded in 1974 by Harold Unger, the company’s vision goes beyond building a sound defensive against estate taxes, also helping the voices of clients to remain a part of their descendant’s lives after they are no longer here. Contact us through our website or call us at 212-755-4777 to learn what we can do for you.
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The Unger Company, Ltd. does not seek to practice law for clients and these published items are intended only to be informational in nature.
