Rubino & Liang, LLC. - Massachusetts Estate Tax Planning Strategies for Massachusetts Residents

Strategies to Minimize Massachusetts Estate Tax

We work with retirees and those nearing retirement. As a result we are experienced in implementing legal and financial strategies to minimize the effect of estate taxes. Please review a few of the most effective strategies for Massachusetts residents:

I. Revocable Trusts

Splitting up assets between husband and wife and taking advantage of the Unified Tax Credit (both Massachusetts and Federal) is accomplished by the use of revocable trusts, which include language that allows the trustee to take advantage of the Unified Tax Credits. The Unified Tax Credit for Massachusetts estate tax is $850,000 per individual in 2004. The Unified Tax Credit for Federal estate tax is currently $1,500,000 per individual in 2004.

II. Gifting Strategies

If you don’t have it, they cannot tax it!

a. Gifting for Current Use - you give the kids some money with no restrictions - they spend it. You can gift $11,000 per individual per year - no limit on how many people you can gift to.

b. Gifting for Future Use - you gift assets into an irrevocable trust where the assets remain until a future period of time. You can control the distribution of assets this way. “No Blood, No Money” - assets go to only those in your bloodline.

III. Life Insurance Strategies

Although this might seem inefficient this may in fact be the only efficient way to pay estate tax. All estate tax (both Federal and Massachusetts) is due when the 2nd spouse passes away. The use of life insurance provides tax-free dollars to pay that tax. The life insurance should be owned by a life insurance trust in order for the proceeds not to be part of your estate.

An analysis comparing outlay of insurance premium vs. outlay for estate tax must be done. The quality of insurance companies is a must.