Asset Protection against Estate Taxes

Asset Protection Against Estate Taxes - Massachusetts Attorney

For higher net worth individuals, estate taxes are a very real risk.

Who has to pay estate taxes?

Anyone who dies with a gross estate of $1 million or more is subject to Estate Taxes. If the decedent has made large lifetime gifts, the threshold for triggering Estate Taxes may be substantially less than $1 million.

How do you calculate the gross estate?

As you can imagine, when it comes time to paying estate taxes, the IRS and the MA Department of Revenue count virtually everything to calculate your gross estate.

Your gross estate will include the obvious things like real estate, bank and investment accounts, stocks and bonds.

But it will also include less obvious things like your insurance proceeds, life estate interests in real estate, and your share of business interests.

Because the gross estate is so expansive, we advise that anyone with over $750,000 (including the value of their life insurance proceeds) consider very carefully including estate tax planning in their estate plan.

Can you lawfully avoid paying estate taxes?

We are fond of saying that the only people who pay estate taxes are those who fail to plan! Sadly, many people fail to plan and their loved ones discover too late that massive payments to the government could have been entirely avoided with careful advance planning.

Estate tax planning is entirely lawful - just as any legitimate tax planning for your income taxes.

Can they really tax me on death?

Many seniors don't realize that the government taxes you in life and in death. Estate taxes are real and here to stay.

I heard the government was doing away with estate taxes?

The fact is that Massachusetts has long had an Estate Tax for estates over $1 million. To our knowledge, there is no discussion of doing away with the MA Estate Tax. Given the state of our economy, we strongly doubt that the Commonwealth of MA will be in any position to do away with Estate Taxes anytime soon.

On the federal level, the current threshold for Estate Taxes is estates over $5.25 million, inflation indexed. However, Estate Tax laws have changed tremendously over the past decade and may change again in the future. Thoughtful advanced planning can protect you and your family.

It is essential to add Estate Tax planning to ensure that your plan includes full protection and flexibility to accommodate the evolving Estate Tax landscape.

Can life insurance proceeds be protected?

Yes! With careful planning, life insurance can often be protected and excluded from estate taxes.

Irrevocable Life Insurance Trusts (ILITs) can be established to shield the proceeds upon your death so that the proceeds are fully available to your beneficiaries rather than going to the government for estate taxes.

ILITs are complex trusts that must be drafted very carefully to comply with tax laws. In addition, ILITs require careful administration during your lifetime to ensure that the Trusts remain compliant with tax laws. If an ILIT is incorrectly established or administered, you risk losing all of the estate tax protection. For this reason, it is essential to work with a Qualified Elder Law Attorney experienced in tax planning.

Will the planning I did years ago still protect me?

Many families have existing estate tax planning done under old laws and regulations. The tax language in their Trusts or other estate planning documents is often complex and hard to read, so most people just aren't sure if they are still protected.

The major changes in the law mean that almost all old plans should be reviewed and likely revised. Critically, an out of date plan can actually increase your Massachusetts estate taxes because of the changes in how state estate taxes were calculated beginning in 2004. Without an update, your documents can cause nearly $100,000 in avoidable Massachusetts Estate Taxes. A Qualified Attorney with experience in Estate Tax planning can review your documents with you and make sure you are protected.

Contact a lawyer at Curley Law Firm LLP today by calling toll-free (866) 406-8582 or contacting us through our Intake Form.