When you pass away, who do you want as the primary beneficary of your estate, your loved ones or the government?
Estate Tax Facts
Many people, as you may guess, do not want their life savings and legacy to be swallowed by estate taxes. What most people are not aware of however, is the fact that if they passed away today their heirs would be forced to pay state and federal estate taxes, even if the deceased is far from what most would consider “wealthy”. They also do not realize that an experienced estate planning attorney can help them AVOID taxes ENTIRELY.
Massacusetts Estate Tax
Massachusetts taxes every dollar in an estate above the $2 million threshold, recently increased from $1 million. What this means is in an estate worth $2.5 million dollars, $500,000 will be subject to a Massachusetts estate tax. Many are concerned with budget cuts and sweeping reform that state legislators will consider dropping the tax exempt amount, thus subjecting more estate to a tax. within the last 10 years, the federal estate tax exemption, which now stands at $5 million, has been as low as $675,000.
If your current estate exceeds the state and federal tax exempt amount, without proper planning you can expect to lose 50 cents of every dollar to the government.
You may be reading this, thinking that your estate is not in jeopardy of being destroyed by taxes because you are well under the exemption amount. You may think your estate is well under, but there are several catagories of non-obvious wealth you need to include in your estate valuation. The most common of these are life insurance death benefits and retirement accounts such as 401(k)’s and IRA’s.
An Example on the Impact of Estate Taxes
Person A is married, has 2 college age children and belives his estate to be worth $700,000. Person A failed to take into consideration his IRAs and life insurance policies. Believing their net worth to be well below the $2 million Person A and his wife executed simple wills with no consideration paid to tax planning.
Tragedy stirkes and Person A dies. After his death his wife collects a $2 million life insurance benefit and his $500,000 IRA. In another tragic turn, Person A’s wife dies shortly after him. Their estate, which they believed to be under the Massachusetts exempt amount, is now worth $3.2 million, leaving $1.2 million subject to estate tax, even if the state and federal thresholds are not lowered.
Avoid Massachusetts Estate Tax
Luckily, many people like Person A and his family can completely avoid paying any estate taxes. To take steps to protect your life savings from the reach of state and federal estate taxes, register online to attend a free educational workshop hosted by Dennis B. Sullivan, Esq, CPA, LLM or by calling 800-964-4295 (24 hours a day). You can also check out Free Elder Law Guides developed by the team of professional at Dennis Sullivan & Associates. By planning now you can save you and your family the stress of having to worry about the future.