What is an estate tax?
As estate tax is a tax imposed by the federal government and by some state governments on the value of property that passes from a person who dies (referred to as a decedent) to the decedent's beneficiaries by reason of his or her death. The tax is imposed on the estate, not on the individual beneficiaries.
What is an inheritance tax?
An inheritance tax is similar to an estate tax, except that the tax is imposed on each beneficiary who inherits property instead of being imposed on the estate. The U.S. Government has an estate tax, not an inheritance tax. Massachusetts and Rhode Island each have an estate tax, not in inheritance tax.
What is a gift tax?
A gift tax is a tax imposed by the federal government on the value of property that a person gives to his or her beneficiaries while he or she is living. Massachusetts and Rhode Island do not have a gift tax.
What is a Generation Skipping Transfer Tax?
A generation skipping transfer (GST) tax is a federal estate or gift tax imposed when a decedent leaves property to his or her beneficiaries in a manner that skips one generation. For example, a gift to a grandchild may constitute a generation skipping transfer.
What is an estate, gift and generation skipping transfer tax exemption?
An estate tax exemption is the total amount of funds and property that a decedent can leave to his or her beneficiaries without incurring an estate tax. A gift tax exemption is the total amount of funds and property a person can give to his or her beneficiaries while living without incurring a federal gift tax. Gifts made during life that exceed the $18,000 per donee annual federal gift tax exclusion reduce the amount of estate tax exemption available at death. A generation skipping transfer tax exemption is the amount of funds and property a person can transfer during life or after death without incurring a federal generation skipping transfer tax.
What are the current 2024 federal and Massachusetts estate tax exemptions, exclusions, deductions and tax rates?
2024 Unified Federal Estate, Gift and Generation Skipping Transfer Tax Exemption for U.S. Citizens and Residents: $13,610,000. If a U.S. Estate Tax Return is filed within nine (9) months after the death of the first to die of a married couple to elect "portability," then the unused exemption of the first spouse can be used by the estate of the surviving spouse. This can have the effect of giving a married couple a total combined exemption of $27,220,000. The use of a credit shelter trust is a way of capturing the exemption of the spouse who is first to die without electing portability within nine months after death.
This exemption is reduced by lifetime gifts in excess of an the annual exclusion.
2024 Federal Estate, Gift and GST Tax Rate on the value of an estate that exceeds the exemption: 40%
2024 Massachusetts Estate Tax Exemption: $2,000,000 (changed by a new law enacted on October 4, 2023, and effective retroactively to January 1, 2023). Prior to January 1, 2023, Exemption was $1,000,000.
This exemption is reduced by lifetime gifts in excess of the federal gift tax annual exclusion. Massachusetts does not have portablity for a married couple of the unused exemption of the first to die. Massachusetts does not have a gift tax.
2024 Massachusetts Estate Tax Rates: 0.8% to 16% depending on the value of the estate. Prior to January 1, 2023, the Massachusetts estate tax was imposed on the entire value of the estate if the exemption was exceeded. Effective January 1, 2023, there is a credit for an amount up to the estate tax that would be imposed on the first $2,000,000 of a decedent's taxable estate. Maximum credit is $99,600, which is the estate tax that would have been imposed on the first $2,000,000 of assets included in the taxable estate. This results in no Massachusetts estate tax on the first $2,000,000 in value of a taxable estate.
The new law clarifies that Massachusetts cannot impose its estate tax on real property and tangible personal property that are not located in Massachusetts.
2024 Federal Gift Tax per Donee Annual Exclusion for U.S. Citizens and Residents: $18,000
This is the aggregate amount of gifts that can be made during each calendar year to a person without using part of the $13,610,000 lifetime federal estate, gift and GSTT tax exemption.
2024 Federal Estate and Gift Tax Marital Deduction for U.S. Citizens: Unlimited
2024 Federal Estate and Gift Tax Charitable Deduction: Unlimited
