USA – MASSACHUSETTS Law and Practice Contributed by: Patricia M. Annino, Rimon, P.C.
ment, businesses, partnerships, real estate and tan - gible personal property because changing residence does not eliminate the tax on Massachusetts source income. The taxpayer should also be cautious about transactions undertaken solely for tax avoidance because the revised non-resident regulations preserve Massachusetts’ existing authority to disregard sham transactions. 1.5 Taxation of Real Estate Owned by Non- Residents and Non-Citizens 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. 1.6 Stability of Tax Laws Massachusetts recently changed its estate tax law. There are no significant estate or income tax bills cur - rently proposed. 1.7 Transparency and Increased Global Reporting There are no specific Massachusetts laws on this. 2. Succession 2.1 Cultural Considerations in Succession Planning Massachusetts law recognises a broad range of fam - ily structures, including same-sex married couples, adoptive families, families formed through assisted reproduction and, under the Massachusetts Parent - age Act, certain de facto and intended parents. This Act was recently passed and sets forth many struc -
tures to protect same-sex couples and children born using in vitro fertilisation. The law protects families and ensures they receive the same rights and protec - tions under the law regardless of marital status, gen - der, sexual orientation or circumstances of the birth of the child. See 9.1 Children for further discussion. Estate plans should use precise definitions of descend - ants, children and family members rather than relying solely on traditional biological relationships. 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 whose name is on the asset, meaning the division of assets may not necessarily be equal, but must be fair. Factors to be considered MGL c 208 Section 34 sets forth the factors to con - sider when dividing assets in a divorce: length of mar - riage, conduct of the parties during marriage, age, health, station, occupation, amount and sources of income, vocational skills and employability, estate, liability and needs, opportunity for future acquisition of capital and income and the amount and duration of alimony, if any is awarded. The court also has the discretion to consider each party’s contribution in the acquisition, preservation or appreciation in value of
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