USA – MASSACHUSETTS Law and Practice Contributed by: Patricia Annino, Rimon, P.C.
1.5 Stability of Tax Laws Massachusetts recently changed its estate tax law. There are no significant estate or income tax bills cur - rently proposed. 1.6 Transparency and Increased Global Reporting There are no specific Massachusetts laws on this. 2. Succession 2.1 Cultural Considerations in Succession Planning Massachusetts has consistently been progressive. For example, the case Goodridge v Goodridge was the landmark case legalising same sex marriage. The Massachusetts Parentage Act was recently passed. It sets forth many structures to protect same sex cou - ples and children born using in vitro fertilisation. The law protects families and ensures they receive the same rights and protections under the law regardless of marital status, gender, sexual orientation or circum - stances of the birth of the child. See 9.1 Children . 2.2 International Planning Massachusetts imposes an estate tax on property owned by non-residents and non-citizens if the gross estate exceeds the filing threshold. Conversion of real property to an intangible personal property asset such as an LLC may remove that asset from the Massa - chusetts taxable estate and subject it to taxation in the state or country in which the decedent is resident. Massachusetts follows federal law and does not rec - ognise a Massachusetts marital deduction for out - right transfers to non-citizen spouses. If the spouse receives assets through a qualified domestic trust, however, the marital deduction is allowed. 2.3 Forced Heirship Laws Massachusetts does not have forced heirship laws. 2.4 Marital Property Equitable Division Massachusetts is not a community property state. In a divorce, assets are divided “equitably” regardless of
Land bank fees Unique to Massachusetts, the sale or transfer of real estate located in Nantucket, Martha’s Vineyard and certain towns on Cape Cod are subject to land bank fees, typically 2%. This is in addition to any convey - ance or excise tax. The buyer is responsible for the land bank tax. 1.2 Exemptions Massachusetts does not have a gift tax. The Massa - chusetts exemption is not tied to the federal exemp - tion. Massachusetts currently has a USD2 million filing threshold for individuals dying after 1 January 2023. A credit of up to USD99,600 is applied. The application of this credit eliminates the Massachusetts estate tax on up to USD2 million of the Massachusetts taxable estate. There is no portability election available. There - fore, planning must be done to utilise each spouse’s Massachusetts estate tax exemption (currently USD2 million). This is done through funding trusts during a person’s lifetime with the Massachusetts exemption amount, or postmortem by disclaimer to the trust, or outright. 1.3 Income Tax Planning There are no opportunities for income tax planning in Massachusetts; only the Section 1014 step-up at death. 1.4 Taxation of Real Estate Owned by Non- Residents A non-resident and a non-citizen are subject to the Massachusetts estate tax for property that has a situs in Massachusetts. This includes real property and tan - gible personal property. The Massachusetts estate tax is calculated as if the decedent was a resident of Mas - sachusetts, calculating the ratio of the Massachusetts situs real and tangible personal property relative to the entire estate and applying the resulting percentage to the initial Massachusetts estate tax calculated on the entire estate. For planning purposes, it is common to convert real property to intangible personal property (which is taxed where the decedent is resident) using limited liability companies (LLCs). The future of this planning opportunity is uncertain.
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