Estate Taxes
“The only thing in life that is certain is death and taxes.”
- Benjamin Franklin
Taxes are complicated. Estate taxes (sometimes referred to as Death Taxes) can be even more complicated.
Here are the 3 most important things to know and remember about estate taxes:
1. They are calculated based on all of the property you own or control at the time of your death. This can include, for example, proceeds from life insurance. This is so although beneficiaries generally do not owe income taxes on life insurance proceeds.
2. Estate taxes are due and payable within 9 months of the date of death. Whether or not your property is liquid (e.g. real estate or a family business) the IRS and sometimes State Department of Revenue will assess a tax on your estate as of the date of death (or 6 months thereafter) and payment becomes due in 9 months!
3. These taxes are the only taxes in our system that are purely VOLUNTARY ! What we mean by this is that estate taxes can be substantially mitigated, if not entirely eliminated; but doing so requires pro-active planning. You cannot get out of paying income taxes…but estate taxes can legitimately be avoided.
There are Federal Taxes that may become due and often State taxes as well.
 Federal Estate Taxes are the subject of much discussion often by Congress and the Administration. They are currently in a state of flux. In 2009, the Federal rate for estate taxes is 45% and applies to all estates with a total value over $3.5 million. We expect this to change sometime in 2009 or 2010. You should consult a tax specialist for the most current information about these laws.
For more information, click here.
MA Estate Taxes are currently ‘decoupled’ from the Federal amount. This means that they apply with lower estate values. Today, any estate with a value over $1 million (and remember – this can include life insurance if it is not removed from your taxable estate) – taxes will become due at the State level. The current rate is progressive and graduates up to 16%.
For more information, click here.
Other States: Property situated in other states may be subject to that state’s estate or inheritance taxes at death. Each state has different rules. Our firm works with a network of attorneys nationally to determine whether such taxes may become due and how to plan for them.
Marital Exemption
The Federal Government exempts all (federally recognized) spouses from paying any estate tax on the transfer of property from a deceased spouse. This is called the ‘unlimited’ marital exemption. There are two important caveats to be aware of: this does not apply to same-sex couples nor does it apply to non-citizen spouses.
For more information about how to deal with issues presented by these situations, please consult one of our attorneys at (617) 716-0300 or info@squillace-law.com.
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