USA – MASSACHUSETTS Trends and Developments Contributed by: Patricia M. Annino, Rimon Law
Massachusetts Private Wealth Planning in 2026: State Tax Divergence, Continuing Trust Governance and the Professionalisation of Trusteeship Massachusetts private wealth planning in 2026 is undergoing a significant transition. Although federal transfer tax planning remains important, the widen - ing divergence between federal and Massachusetts estate tax law, evolving fiduciary responsibilities, changing trust administration, and increasing court oversight are reshaping how sophisticated estate plans are designed and administered. Trend: Massachusetts has become a state tax planning jurisdiction A . Massachusetts has become a state - tax planning jurisdiction : the federal exemption reset makes Massachusetts planning more important Many Massachusetts clients are no longer federal estate-tax clients but remain Massachusetts estate- tax clients. The federal basic exclusion amount is USD15 million for 2026, while Massachusetts retains its USD2 mil - lion filing threshold and USD99,600 credit. Massa - chusetts continues to use the Internal Revenue Code as in effect on 31 December 2000, for its estate-tax calculation. Massachusetts made two changes to its estate tax law. For deaths on or after 1 August 2025, out-of-state real and tangible personal property is subtracted from a resident decedent’s federal gross estate for Massachusetts purposes; and prior Massa - chusetts qualified terminable interest property (QTIP) is brought into the surviving spouse’s Massachusetts tax base as prescribed by the amended statute. These tax developments have also influenced how trusts are drafted and administered. B . Massachusetts planners are rethinking lifetime gifting Massachusetts imposes no separate gift tax, and lifetime gifts can remove the transferred property and later appreciation from the donor’s gross estate. Adjusted taxable gifts nevertheless remain relevant to the Massachusetts filing threshold and tax computa - tion. The important planning insight is the comparison between a possible Massachusetts estate-tax saving
of up to 16%; and the income-tax cost of sacrificing a basis adjustment at death. C . Massachusetts trust income taxation has become increasingly important For 2026 Massachusetts imposes an additional 4% surtax on income above USD1,107,750 (indexed annu - ally for inflation), and the surtax expressly applies to trusts and estates as Chapter 62 taxpayers. This tax is in addition to the ordinary 5% rate and can affect fidu - ciary income, capital gains, estate administration and distribution from trusts. This is increasingly important in private wealth planning because trusts and estates may recognise concentrated income in a single year – for example from the sale of a business, sale of con - centrated securities, liquidation of real estate, termi - nation of a trust or realisation of capital gains during the period of estate administration. Planning response may include timing gains over more than one tax year, reviewing whether gains can be properly carried out to beneficiaries, evaluating beneficiary residence, recon - sidering the location and residence of trustees, distrib - uting assets in kind rather than selling them and inte - grating income tax planning with estate tax planning. Massachusetts issued revised non-resident income- tax regulations with effect from January 2025. The regulation expressly addresses non-resident estates and trusts deriving Massachusetts-source income and their filing obligations. For sophisticated families, trustee selection now has tax consequences as well as fiduciary consequences. Massachusetts fiduciary income taxation depends on the statutory category of trust, settlor residence, trustee residence, beneficiary interests, source income and constitutional limitations. Trend: Massachusetts domicile planning Massachusetts is a high-tax jurisdiction compared to other states such as Florida, New Hampshire and Texas. Because of the Massachusetts income tax sur - charge and the estate tax many ultra-high net worth families are changing their domicile. The state in which the taxpayer is legally resident retains the power to tax all the taxpayer’s income and property. If the taxpayer has income or property in states in which they are not a resident, the non-resident state typically only taxes the activity conducted within the non-resident’s state’s borders. The Massachusetts Department of Revenue
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