The Massachusetts Estate Tax Catches Families Who Are Not Wealthy

Ask most people whether the estate tax applies to them and they will say no, correctly, about the federal one. The federal exemption is high enough that it reaches a very small fraction of estates.

Massachusetts is a different conversation entirely. The state levies its own estate tax at a threshold measured in the low millions rather than the tens of millions, and it applies it without portability between spouses. In much of eastern Massachusetts, a long-held house and a retirement account get a family there without anyone feeling wealthy.

How the Massachusetts tax is structured

The threshold is $2,000,000, and it is not indexed for inflation. It does not rise with house prices or with the cost of living. Every year that Massachusetts property values increase, the tax reaches further down.

The 2023 reform improved the mechanics considerably. Before it, Massachusetts operated a cliff: an estate one dollar over the threshold was taxed from the first dollar, not merely on the excess. The reform replaced that with a credit, capped at $99,600, which effectively shelters the first $2,000,000 and taxes only what exceeds it. That is a genuine improvement and it removed the most punitive feature of the old regime.

What it did not do is raise the threshold to anything approaching the federal level, index it, or introduce portability.

No portability is the expensive part

Under federal law, a surviving spouse can carry over the deceased spouse’s unused exemption. A married couple can leave everything to each other at the first death and still have both exemptions available at the second.

Massachusetts has no equivalent. An exclusion not used at the first death is lost. A couple with a combined estate of $3,500,000 who leave everything to each other outright have, without doing anything wrong, discarded $2,000,000 of shelter — and the survivor’s estate is taxed on $1,500,000 that could have been protected.

This is the single most common and most expensive Massachusetts planning error, and it is entirely avoidable. Credit shelter provisions in the wills or in a revocable trust capture the first spouse’s exclusion by directing that amount into a trust for the survivor’s benefit rather than outright to them. The survivor can still use the money; it simply is not owned by them at their death. Massachusetts also permits a state-only QTIP election under chapter 65C, which allows the Massachusetts treatment to be managed separately from the federal.

The planning is not exotic and it is not expensive. It just has to be done before the first death, because there is no fix afterwards.

The gift trap

Massachusetts has no gift tax, which sounds like an opportunity and is frequently misread as one. Lifetime gifts are not taxed by Massachusetts — but adjusted taxable gifts are counted in determining whether the estate meets the filing threshold.

The practical effect is that giving assets away during life does not necessarily move an estate below the Massachusetts line. Families who make substantial gifts on the assumption that they have reduced their Massachusetts exposure can find the estate still has a filing obligation, and a return that nobody expected to prepare.

Nonresidents with Massachusetts property

The tax reaches real property and tangible personal property located in Massachusetts regardless of where the owner lived. Someone who retired to Florida but kept the house on the Cape, or the family property in the Berkshires, has Massachusetts-situs property and a potential Massachusetts filing.

The method for apportioning a nonresident’s estate changed for deaths on or after 1 August 2025, moving from a pro-rata fraction to a computation that reduces the estate. Anyone who had this analysed before that change should have it looked at again, because the answer may be different.

What to do about it

For most Massachusetts families the sequence is straightforward. Add up everything — house, retirement accounts, life insurance death benefit, which counts and which people consistently forget, business interests, everything — and see where the total sits relative to $2,000,000. Do it for the couple together, not for each spouse separately, because the second death is where the tax lands.

If the number is anywhere near the threshold, the credit shelter question needs answering before either spouse dies. If life insurance is what pushes the estate over, an irrevocable life insurance trust may remove the death benefit from the taxable estate. If the estate is comfortably below, the planning conversation moves on to probate, incapacity and who inherits — which is where it should have been all along.

The Massachusetts estate planning page covers the structures in more detail.

Probate is the other half of the conversation

The estate tax decides what is paid. Probate decides how long it takes and who is in charge, and Massachusetts handles that side comparatively well. The Massachusetts Uniform Probate Code, chapter 190B, introduced informal probate as an alternative to the older formal, supervised route. Informal probate is handled by a magistrate on the papers, without a hearing, where the will is straightforward and nobody objects.

Two features of the MUPC are worth knowing in advance. Voluntary administration is available for very small estates of personal property, which resolves a modest estate without a full proceeding. And there is a three-year limit on commencing probate after death — a family that puts off dealing with an estate can find the ordinary route closed, with only narrower remedies remaining. Estates get postponed for entirely human reasons; the deadline does not care.

The documents that sit alongside the tax planning

It is easy for the estate tax to absorb the whole conversation and for the rest of the plan to go unexamined. The rest of the plan is what gets used first. A durable power of attorney lets someone manage property during incapacity. A health care proxy under chapter 201D names who makes medical decisions, and it matters more in Massachusetts than in most states because Massachusetts has no living will statute — a written statement of wishes is evidence of intent rather than a binding directive, so the proxy is the operative document.

And where a revocable trust is being used for the credit shelter planning, it only works if it is funded. A trust drafted to capture the first spouse’s exclusion cannot capture anything if the assets are still titled in the couple’s joint names when the first death occurs. Joint ownership and credit shelter planning pull in opposite directions, which is exactly the kind of conflict that needs deciding on purpose rather than discovering later.

Frequently Asked Questions

Does the $2,000,000 threshold apply to each spouse?

Each estate is measured separately, but because Massachusetts has no portability, an exclusion not used at the first death is lost rather than carried over. That is why a couple with a combined estate above the threshold needs credit shelter planning rather than simply relying on two exclusions existing on paper.

Does life insurance count?

If the policy is owned by the decedent, the death benefit is generally included in the taxable estate — which surprises families, because the money never felt like theirs. An irrevocable life insurance trust is the usual answer where the policy is what pushes the estate over.

We moved out of Massachusetts. Are we clear?

Not if you kept real property or tangible personal property here. Massachusetts-situs property remains within the tax regardless of where the owner is domiciled, and the apportionment rules for nonresident estates changed for deaths on or after 1 August 2025.

Talk it through

If you own a Massachusetts house and a retirement account and have never had the combined number looked at, that is a short exercise with a large number attached to getting it wrong. The Massachusetts contact page has the direct line.