January 17, 2025 • 12 mins
What Are The Key Considerations And Strategies For Effective Estate Planning In Massachusetts?
Unravel the secrets of estate planning in Massachusetts with tax manager Tim Lafalam from MP CPAs, as he enlightens us on the intricacies of protecting assets and preserving legacies. Tim, who spearheads estate planning at MP CPAs, shares his journey from intern to tax manager and his passion for guiding clients through the ever-changing landscape of tax laws. Discover the critical strategies and considerations that are key to effective estate planning, especially following the notable changes in tax laws as of fall 2023. Tim emphasizes the importance of starting early with techniques like gifting, charitable, and trust planning to ensure long-term success.
Explore the complexities of the Massachusetts estate tax as Tim demystifies the $2 million threshold that mandates the M706 filing. With clarity, he addresses common misconceptions about taxable estates and provides insight into calculating a gross taxable estate. Tim also sheds light on assets often excluded from this calculation, such as those under partial ownership, with practical examples that make this complex topic more accessible. Whether you're just beginning to build your financial foundation or managing an established estate, this episode is packed with expert insights and practical advice to help you navigate the unique estate planning landscape in Massachusetts.
To learn more about MP CPAs visit:
https://thempgroupcpa.com/
MP CPAs
413-739-1800
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:04):
Welcome to the Knowing what Counts podcast, the
place where expert guidancemeets smart financial decisions.
Whether you're a high net worthindividual or a thriving
business, the experts at MPCPAsare here to help you protect and
optimize your wealth.
Let's get started, becausesuccess begins with knowing what
(00:25):
counts.
Speaker 2 (00:33):
Estate planning in Massachusetts requires careful
navigation of state-specificlaws and regulations.
The team at MPCPAs unpacks thecrucial factors to consider and
strategies to ensure your assetsare protected, beneficiaries
are cared for and your legacy ispreserved.
(00:53):
Welcome back everyone.
I'm Sophia Yvette, co-hostslash producer, back in the
studio with Tim LaFollum, taxmanager at MPCPAs.
So, tim, how's it going?
Speaker 3 (01:07):
Hi Sophia, I'm great.
I'm happy to be here.
Hard to believe we're alreadyin 2025, but here we are.
I just got used to writing 2024and we're already in 2025.
Speaker 2 (01:17):
I know how the time flies and, tim, since our
audience hasn't met you yet, goahead and tell them a bit about
yourself.
Speaker 3 (01:27):
Yeah, sure.
So I graduated from Western NewEngland in 2016.
For two years before that, Iinterned here at MPCPAs, so it
was a pretty seamless transitionin 2016, starting full-time
here.
And here we are, nine shortyears later from a full-time
start.
I kind of take the lead on mostof the estate work here at
MPCPA.
(01:47):
I had an interest in it rightaway and I've loved it ever
since.
I've made my way up to manager.
I'm excited for the future here.
Speaker 2 (01:56):
So, tim, what are the key considerations and
strategies for effective estateplanning in Massachusetts?
Speaker 3 (02:05):
You know there's a lot, especially given the way
things have changed In the fallof 2023,.
There were some significantchanges which we'll talk about
here in a little while.
I think just staying on pacewith how the tax law changes,
just like any kind of realm oftax law, to make sure that your
estate planning strategy wasstill effective for whatever the
(02:25):
current laws are, and justbeing aware of different
strategies, whether it begifting, charitable planning,
trust planning, things of thatnature.
There's all kinds of thingsthat people can do, and I'll add
that you can start at a veryyoung age.
A lot of people will wait waytoo long to get an effective
estate planning strategy inplace, but a lot of these things
that we'll talk about today arethings that should start at a
(02:48):
really young age, once you getinto a financial comfort zone.
Speaker 2 (02:52):
Most definitely, and so let's start with the basics.
What should people know aboutMassachusetts estate tax?
Speaker 3 (03:02):
So I think the first thing is this magic $2 million
threshold.
So for any individuals passingafter January 1st of 2023 who
have a gross taxable estate over$2 million, there is what's
called an M706 filingrequirement and that is what
(03:22):
we'll call the estate tax returnin Massachusetts.
So as part of that doesn'tnecessarily mean there'll be a
state tax due.
That's sort of a commonmisconception and there's a lot
of reasons why.
But important part to know isthat individuals passing away
with a gross taxable estate of$2 million or more do have this
M706 filing requirement $2million or more, do have this
(03:48):
M706 filing requirement.
Speaker 2 (03:50):
And while every situation is unique, what are
some basics people should knowabout the calculation of taxable
estate?
Speaker 3 (03:56):
Yeah, so, like you said, there's a lot that can go
into it, Kind of as step one.
What I like to explain is justpicture somebody's net worth
right.
So all the assets that somebodyowns whether that be investment
accounts, brokerage accounts,cash in the bank accounts, cash
under your mattress, say,jewelry or personal property,
vehicles, things like that,retirement accounts, life
(04:19):
insurance paid out when somebodypasses All these things are
sort of.
Speaker 2 (04:31):
And are there any assets that are commonly
excluded from the taxable grossestate?
Speaker 3 (04:38):
Yeah, there certainly are.
One of the most common ispartial ownership.
So let's say that there's apiece of real estate or really
any assets, for the most partheld, you know, 50-50 split
joint ownership.
Only the extent of thedecedent's ownership is included
in the gross taxable estate.
So most common thing we seehusband and wife probably own
(05:03):
their residence together.
So generally when the firstspouse passes, only 50% of
whatever that deemed date ofdeath value is is includable in
that gross taxable estate.
There's some other things alittle more complicated but
irrevocable life insurance trust.
If those are effectively set upas they should be and own the
(05:23):
insurance policy, then theproceeds paid out when the
decedent passes are excludedfrom the taxable estate.
Certain irrevocable trusts thatare funded during a decedent's
lifetime are also excluded.
Everything from very simplethings to very complex things.
There are certainly assets thatare excluded.
One of the more commonmisconceptions is that post-tax
(05:44):
retirement accounts like RothIRAs are includable.
They are not excluded.
People will think, because themoney's already been taxed, that
there'll be no tax to ever payagain on them.
That is true in part from anincome tax perspective, not from
an estate tax.
Some things included, somethings excluded, but hopefully
that gives a pretty good idea ofthe inclusions and exclusions
(06:06):
when you're thinking about agross taxable estate.
Speaker 2 (06:09):
What about if a Massachusetts resident passes
away with property in adifferent state?
What about if a Massachusettsresident passes?
Speaker 3 (06:15):
away with property in a different state.
Yeah, that's a great questionand one that has changed here
over the past two years aboutthree or four times.
So, prior to January 1st of 23,the idea was any out-of-state
real estate or tangible personalproperty, but more commonly was
real estate held in anotherstate.
So die a Massachusetts residentif you have a New York property
, a Florida property.
But more commonly was realestate held in another state, so
die a Massachusetts resident Ifyou have a New York property, a
(06:37):
Florida property, a Californiaproperty anywhere else.
Pre-1-1-23, that was excluded.
And then, in the fall of 2023,they came out with these changes
that were intended to beeffective for deaths 1-1-23 and
later and the initial reactionwas that they were going to now
bring those out of state realestate properties back into the
(06:59):
taxable estate and I think thatlasted I don't know three or
four weeks and there was somesignificant pushback, which
makes sense because people hadplanned for so long, given a
certain you know it's estateplanning.
They plan for certain estatelaws and then changing them and
bringing those out-of-stateproperties back in really made
no sense.
So the DOR received some prettystiff pushback and, as of right
(07:23):
now, those assets are againjust straight up, excluded from
the gross taxable estate.
Speaker 2 (07:30):
And to flip the script.
Can a non-Massachusettsresident be subject to the M706
filing and have to payMassachusetts estate tax?
Speaker 3 (07:39):
Yep, certainly can.
We see those quite often here.
Basically how it works if it is, let's say, a Florida resident
who has a property in Nantucket,cape Cod or anywhere else in
Massachusetts, if their grosstaxable estate is over that $2
million threshold and they haveproperty in Massachusetts, if
their gross taxable estate isover that $2 million threshold
and they have property inMassachusetts, then they are
(08:01):
basically treated for filingrequirement purposes as if
they're a Massachusetts resident, meaning there is a filing
requirement Down the road onceyou get to the calculation of
the estate tax.
It's a little bit complicatedand it's kind of prorated, but
just know that the filingrequirement is still in place.
Speaker 2 (08:20):
Are there any deductions available that folks
should be aware of?
Speaker 3 (08:25):
Yeah, certainly are.
One of the more common onesthat we see in a typical estate
plan is what's called themarital deduction.
So, generally speaking, firstspouse to pass passes almost all
, if not all, of their assets totheir surviving spouse, their
surviving spouse in the estatereceive what's called a marital
(08:45):
deduction.
It can reduce the estatereceives a deduction for every
dollar that passes to thesurviving spouse.
Speaker 1 (08:53):
So, effectively.
Speaker 3 (08:53):
If all of the assets are passing to the surviving
spouse, you could end up at theend of the day with a net zero
taxable estate.
That does not eliminate therequirement to file, so
important to know the filingrequirement and the calculation
of estate tax are two separateconcepts.
There's some other things too,sophia Sorry to cut you off
Charity for one so specificrequests to charities that are
(09:18):
written in a will or in a trustdocument, things like that.
Those are deductions on theestate tax return as are other
debts, mortgages, credit carddebt, things like that.
Speaker 2 (09:30):
I was just about to ask you anything else folks
should know in this area ofMassachusetts estate tax.
Speaker 3 (09:37):
Yeah, I mean there's a lot.
I mean we could talk about thisfor hours, if not days.
I think one of the biggestthings and one of the reasons
that we get involved in a lot ofinstances is I get the question
of why file?
Who's going to catch me,especially if no tax is due?
And I like to inform folksabout this estate tax lien.
When somebody passes they ownreal estate, the Massachusetts
(09:58):
DOR estate tax unit placeswhat's called a silent lien on a
piece of property.
I call it silent becausethey're not going to knock on
your door and place a lien onany property, but know that the
lien is in place and down theroad, if an executor, the kids,
the family, the beneficiaries,whoever it may be, want to sell
(10:19):
that piece of property, it canget held up on closing day or
leading up to closing daybecause there is no clean deed
recorded, because that lien isstill in place.
So the way it works is filingthe 706.
Once the DOR approves, you areissued a certificate releasing
that lien.
That certificate goes on recordwith the Registry of Deeds and
(10:44):
all is well so that when closingday happens, everything shows
as a clean title.
Speaker 2 (10:50):
While the focus has been on Massachusetts.
Are there federal filings orother state filings that folks
should be aware of?
Speaker 3 (10:59):
Yeah, there are a lot .
Not every state has an estatetax like we've talked about
today.
I think it's roughly half ofthem.
Massachusetts is certainly oneof the lower thresholds at $2
million.
I think New York's upwards oflike six Connecticut even double
that or something.
Massachusetts certainly one ofthe lower thresholds Federally.
Very similar concept, exceptthat threshold is $13 million.
(11:22):
So obviously the $2 million isa lot more attainable for folks.
Those filing requirements are alot more frequent.
That federal equivalent of thatthreshold is again, it's north
of $13 million adjusted forinflation every year.
Speaker 2 (11:37):
Love it, Tim.
Hopefully we will catch you onthe next episode.
Have a fantastic rest of yourday.
Speaker 3 (11:43):
Excellent.
Thank you, Sophia.
Speaker 1 (11:49):
Thanks for listening to the Knowing what Counts
podcast.
Ready to optimize your wealthand protect your future, visit
TheMPGroupCPAcom or call413-739-1800 to connect with our
team of experts.
Remember, success is aboutknowing what counts.
Welcome to the Knowing what Counts podcast, the
place where expert guidancemeets smart financial decisions.
Whether you're a high net worthindividual or a thriving
business, the experts at MPCPAsare here to help you protect and
optimize your wealth.
Let's get started, becausesuccess begins with knowing what
(00:25):
counts.
Speaker 2 (00:33):
Estate planning in Massachusetts requires careful
navigation of state-specificlaws and regulations.
The team at MPCPAs unpacks thecrucial factors to consider and
strategies to ensure your assetsare protected, beneficiaries
are cared for and your legacy ispreserved.
(00:53):
Welcome back everyone.
I'm Sophia Yvette, co-hostslash producer, back in the
studio with Tim LaFollum, taxmanager at MPCPAs.
So, tim, how's it going?
Speaker 3 (01:07):
Hi Sophia, I'm great.
I'm happy to be here.
Hard to believe we're alreadyin 2025, but here we are.
I just got used to writing 2024and we're already in 2025.
Speaker 2 (01:17):
I know how the time flies and, tim, since our
audience hasn't met you yet, goahead and tell them a bit about
yourself.
Speaker 3 (01:27):
Yeah, sure.
So I graduated from Western NewEngland in 2016.
For two years before that, Iinterned here at MPCPAs, so it
was a pretty seamless transitionin 2016, starting full-time
here.
And here we are, nine shortyears later from a full-time
start.
I kind of take the lead on mostof the estate work here at
MPCPA.
(01:47):
I had an interest in it rightaway and I've loved it ever
since.
I've made my way up to manager.
I'm excited for the future here.
Speaker 2 (01:56):
So, tim, what are the key considerations and
strategies for effective estateplanning in Massachusetts?
Speaker 3 (02:05):
You know there's a lot, especially given the way
things have changed In the fallof 2023,.
There were some significantchanges which we'll talk about
here in a little while.
I think just staying on pacewith how the tax law changes,
just like any kind of realm oftax law, to make sure that your
estate planning strategy wasstill effective for whatever the
(02:25):
current laws are, and justbeing aware of different
strategies, whether it begifting, charitable planning,
trust planning, things of thatnature.
There's all kinds of thingsthat people can do, and I'll add
that you can start at a veryyoung age.
A lot of people will wait waytoo long to get an effective
estate planning strategy inplace, but a lot of these things
that we'll talk about today arethings that should start at a
(02:48):
really young age, once you getinto a financial comfort zone.
Speaker 2 (02:52):
Most definitely, and so let's start with the basics.
What should people know aboutMassachusetts estate tax?
Speaker 3 (03:02):
So I think the first thing is this magic $2 million
threshold.
So for any individuals passingafter January 1st of 2023 who
have a gross taxable estate over$2 million, there is what's
called an M706 filingrequirement and that is what
(03:22):
we'll call the estate tax returnin Massachusetts.
So as part of that doesn'tnecessarily mean there'll be a
state tax due.
That's sort of a commonmisconception and there's a lot
of reasons why.
But important part to know isthat individuals passing away
with a gross taxable estate of$2 million or more do have this
M706 filing requirement $2million or more, do have this
(03:48):
M706 filing requirement.
Speaker 2 (03:50):
And while every situation is unique, what are
some basics people should knowabout the calculation of taxable
estate?
Speaker 3 (03:56):
Yeah, so, like you said, there's a lot that can go
into it, Kind of as step one.
What I like to explain is justpicture somebody's net worth
right.
So all the assets that somebodyowns whether that be investment
accounts, brokerage accounts,cash in the bank accounts, cash
under your mattress, say,jewelry or personal property,
vehicles, things like that,retirement accounts, life
(04:19):
insurance paid out when somebodypasses All these things are
sort of.
Speaker 2 (04:31):
And are there any assets that are commonly
excluded from the taxable grossestate?
Speaker 3 (04:38):
Yeah, there certainly are.
One of the most common ispartial ownership.
So let's say that there's apiece of real estate or really
any assets, for the most partheld, you know, 50-50 split
joint ownership.
Only the extent of thedecedent's ownership is included
in the gross taxable estate.
So most common thing we seehusband and wife probably own
(05:03):
their residence together.
So generally when the firstspouse passes, only 50% of
whatever that deemed date ofdeath value is is includable in
that gross taxable estate.
There's some other things alittle more complicated but
irrevocable life insurance trust.
If those are effectively set upas they should be and own the
(05:23):
insurance policy, then theproceeds paid out when the
decedent passes are excludedfrom the taxable estate.
Certain irrevocable trusts thatare funded during a decedent's
lifetime are also excluded.
Everything from very simplethings to very complex things.
There are certainly assets thatare excluded.
One of the more commonmisconceptions is that post-tax
(05:44):
retirement accounts like RothIRAs are includable.
They are not excluded.
People will think, because themoney's already been taxed, that
there'll be no tax to ever payagain on them.
That is true in part from anincome tax perspective, not from
an estate tax.
Some things included, somethings excluded, but hopefully
that gives a pretty good idea ofthe inclusions and exclusions
(06:06):
when you're thinking about agross taxable estate.
Speaker 2 (06:09):
What about if a Massachusetts resident passes
away with property in adifferent state?
What about if a Massachusettsresident passes?
Speaker 3 (06:15):
away with property in a different state.
Yeah, that's a great questionand one that has changed here
over the past two years aboutthree or four times.
So, prior to January 1st of 23,the idea was any out-of-state
real estate or tangible personalproperty, but more commonly was
real estate held in anotherstate.
So die a Massachusetts residentif you have a New York property
, a Florida property.
But more commonly was realestate held in another state, so
die a Massachusetts resident Ifyou have a New York property, a
(06:37):
Florida property, a Californiaproperty anywhere else.
Pre-1-1-23, that was excluded.
And then, in the fall of 2023,they came out with these changes
that were intended to beeffective for deaths 1-1-23 and
later and the initial reactionwas that they were going to now
bring those out of state realestate properties back into the
(06:59):
taxable estate and I think thatlasted I don't know three or
four weeks and there was somesignificant pushback, which
makes sense because people hadplanned for so long, given a
certain you know it's estateplanning.
They plan for certain estatelaws and then changing them and
bringing those out-of-stateproperties back in really made
no sense.
So the DOR received some prettystiff pushback and, as of right
(07:23):
now, those assets are againjust straight up, excluded from
the gross taxable estate.
Speaker 2 (07:30):
And to flip the script.
Can a non-Massachusettsresident be subject to the M706
filing and have to payMassachusetts estate tax?
Speaker 3 (07:39):
Yep, certainly can.
We see those quite often here.
Basically how it works if it is, let's say, a Florida resident
who has a property in Nantucket,cape Cod or anywhere else in
Massachusetts, if their grosstaxable estate is over that $2
million threshold and they haveproperty in Massachusetts, if
their gross taxable estate isover that $2 million threshold
and they have property inMassachusetts, then they are
(08:01):
basically treated for filingrequirement purposes as if
they're a Massachusetts resident, meaning there is a filing
requirement Down the road onceyou get to the calculation of
the estate tax.
It's a little bit complicatedand it's kind of prorated, but
just know that the filingrequirement is still in place.
Speaker 2 (08:20):
Are there any deductions available that folks
should be aware of?
Speaker 3 (08:25):
Yeah, certainly are.
One of the more common onesthat we see in a typical estate
plan is what's called themarital deduction.
So, generally speaking, firstspouse to pass passes almost all
, if not all, of their assets totheir surviving spouse, their
surviving spouse in the estatereceive what's called a marital
(08:45):
deduction.
It can reduce the estatereceives a deduction for every
dollar that passes to thesurviving spouse.
Speaker 1 (08:53):
So, effectively.
Speaker 3 (08:53):
If all of the assets are passing to the surviving
spouse, you could end up at theend of the day with a net zero
taxable estate.
That does not eliminate therequirement to file, so
important to know the filingrequirement and the calculation
of estate tax are two separateconcepts.
There's some other things too,sophia Sorry to cut you off
Charity for one so specificrequests to charities that are
(09:18):
written in a will or in a trustdocument, things like that.
Those are deductions on theestate tax return as are other
debts, mortgages, credit carddebt, things like that.
Speaker 2 (09:30):
I was just about to ask you anything else folks
should know in this area ofMassachusetts estate tax.
Speaker 3 (09:37):
Yeah, I mean there's a lot.
I mean we could talk about thisfor hours, if not days.
I think one of the biggestthings and one of the reasons
that we get involved in a lot ofinstances is I get the question
of why file?
Who's going to catch me,especially if no tax is due?
And I like to inform folksabout this estate tax lien.
When somebody passes they ownreal estate, the Massachusetts
(09:58):
DOR estate tax unit placeswhat's called a silent lien on a
piece of property.
I call it silent becausethey're not going to knock on
your door and place a lien onany property, but know that the
lien is in place and down theroad, if an executor, the kids,
the family, the beneficiaries,whoever it may be, want to sell
(10:19):
that piece of property, it canget held up on closing day or
leading up to closing daybecause there is no clean deed
recorded, because that lien isstill in place.
So the way it works is filingthe 706.
Once the DOR approves, you areissued a certificate releasing
that lien.
That certificate goes on recordwith the Registry of Deeds and
(10:44):
all is well so that when closingday happens, everything shows
as a clean title.
Speaker 2 (10:50):
While the focus has been on Massachusetts.
Are there federal filings orother state filings that folks
should be aware of?
Speaker 3 (10:59):
Yeah, there are a lot .
Not every state has an estatetax like we've talked about
today.
I think it's roughly half ofthem.
Massachusetts is certainly oneof the lower thresholds at $2
million.
I think New York's upwards oflike six Connecticut even double
that or something.
Massachusetts certainly one ofthe lower thresholds Federally.
Very similar concept, exceptthat threshold is $13 million.
(11:22):
So obviously the $2 million isa lot more attainable for folks.
Those filing requirements are alot more frequent.
That federal equivalent of thatthreshold is again, it's north
of $13 million adjusted forinflation every year.
Speaker 2 (11:37):
Love it, Tim.
Hopefully we will catch you onthe next episode.
Have a fantastic rest of yourday.
Speaker 3 (11:43):
Excellent.
Thank you, Sophia.
Speaker 1 (11:49):
Thanks for listening to the Knowing what Counts
podcast.
Ready to optimize your wealthand protect your future, visit
TheMPGroupCPAcom or call413-739-1800 to connect with our
team of experts.
Remember, success is aboutknowing what counts.
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