Two proposals – one from the Governor, the other in the legislature – seek to raise the estate tax exemption in Massachusetts. Whether it goes to $2 million or $3 million, HNW and UHNW families in the state will get a bit of relief, but will need to plan as usual. Contact The Unger Company to learn more about how we can help.
Massachusetts, which for decades has set the bar low in terms of its state estate tax, is moving toward modernizing its estate tax code.
Governor Maura Healey and the state legislature have pitched competing proposals, but the bottom line is that whichever proposal becomes law in the state, The Unger Company would have to say taxpayers in the state will be the victors.
Under the broader public heading of “tax relief”, a cute euphemism for ‘the nickname Taxachusetts is just too darn true,’ the measures would move the estate tax exemption from $1 million to either $2 million (legislature bills) or $3 million (governor’s proposal). This is something that is long overdue.
As we have pointed out on The Unger Company website, The Bay State’s exemption of $1 million is tied with Oregon for the lowest exemption in the country. Hopefully, this isn’t about bragging rights.
The other component of the current estate tax reform proposals is the elimination of the “cliff.” This means that if a decedent’s estate exceeded $1 million by, say $100,000, the heirs or beneficiaries who are not a spouse would have to pay the tax as calculated from the first dollar. The estate tax in neighboring New York, for instance, has a cliff effect, and once the much higher exemption is breached, the tax is applied from dollar one.
Wrap your head around this for a moment: According to Realtor.com, in April 2023 the median home sale price in the metro Boston area was more than $750,000. That’s median! This means there are plenty of properties that are much more expensive in and around Boston. In fact, Rocket Mortgage ranks Boston as the sixth-most-expensive city in the U.S. Sure, the lobster is great, but at what cost?
Consider that if you’re basically a middle-income person, or maybe a little better than middle income, wealth transfer to anyone other than a spouse or charity would require an estate tax to be paid. Keep in mind that Massachusetts’ estate tax is a transfer tax imposed on the value of a taxable estate.
People who are in the high-net-worth classes would get a bit of relief, but not enough under the current proposals. For The Unger Company, people in the value of these estates basically begin at $12-15 million range and then move up. As estate tax strategists, we would be happy for our clients that they don’t have to pay estate taxes from dollar one, but since they do it, requires a clever bit of planning to help offset state and federal estate taxes that begin to accumulate once you pass the current exemptions.
This isn’t something that only impacts liquid assets like cash or equities. When the total estate value includes real estate or ownership in an ongoing business enterprise, this can bring on a nightmare for a family. A fire sale liquidation of a business may be like removing the keystone and watching the financial structure that a family built over generations begin to crumble.
We do applaud the efforts being made in Massachusetts. Progress, even if it’s not the whole enchilada, is still a step or two in the right direction. As our founder Harold Unger is fond of saying, “You won’t get a thank you note for taxes paid.” That’s true whether the return address is Washington, DC or Beacon Street. And Mr. Unger has a soft spot for Massachusetts residents since he earned his J.D. and LL.M. from Boston University School of Law and its Graduate Tax Program.
Since 1974, The Unger Company, Ltd. has worked with high net worth (HNW) and ultra-high net worth (UHNW) clients to create strategies and build solutions for the estate taxes that will eventually come. Working with a client’s existing legal, financial, and accounting team, The Unger Company uses insurance and other products to build shelters that avoid or protect assets from estate taxes, enabling whole or near-whole wealth transfer to succeeding generations. Harold Unger is also an expert at creating the kind of voice after death that many clients want so they can remain present in the lives of their loved ones. Contact us through our website or call us at 212-755-4777 to learn what we can do for you.
Directions: https://goo.gl/maps/GaiVqoLUXoxczU7s9
Harold Unger LinkedIn: https://www.linkedin.com/in/harold-m-unger-9453aa73/
The Unger Company Ltd. LinkedIn: https://www.linkedin.com/company/93617123/
The Unger Company, Ltd. does not seek to practice law for clients and these published items are intended only to be informational in nature.
