Planning for Massachusetts Inheritance Laws
You’ve spent decades taking care of your most treasured possessions and working to grow your wealth. All that care wasn’t just about protecting those things during your lifetime, but preserving them for the next generation. Sometimes understanding the laws in this area can be confusing. A common misconception is that there are specific inheritance laws. In fact, there is no such thing as “Massachusetts inheritance laws.” Understanding what the actual laws are and how they may apply to your family is one reason why working with an attorney can be an important part of the estate planning process. Planning ahead is the key to making sure that the transfer of your property and money happens the way you want it to.
What to Know About So-Called “Massachusetts Inheritance Laws”
As in other states, Massachusetts has a variety of individual laws that get bundled together and talked about (by non-lawyers) as “inheritance laws.” These laws may or may not be relevant for your specific situation. I recommend talking to your estate planning attorney to figure out what issues might come up for your loved ones when your assets are being distributed. Knowing which laws will affect your heirs allows you to plan for them in advance.
That said, there are a few elements of the Massachusetts inheritance laws that commonly come up for families.
Probate
Probate is the legal process by which an estate is settled and its property distributed to the decedent’s heirs. All states have fairly similar probate processes and laws. Massachusetts has three types of probate: informal probate, formal probate, and late and limited formal probate. (Sometimes a procedure called voluntary administration may be used instead, in cases involving minimal assets and no real estate.)
Which type of probate your estate will require depends on factors including whether you have a clear and valid will, whether creditors have claims on your assets and whether any of your heirs are incapacitated. Some of your assets may bypass probate if they’re held in trusts. Because probate in Massachusetts can be a difficult and lengthy process, sometimes stretching beyond a year, I advise my clients to use estate planning to minimize the intervention of the probate court.
Intestate Succession
Massachusetts intestacy laws apply when someone dies intestate (without a will). Every state has intestate succession laws, which dictate the order in which heirs inherit from someone who didn’t make their own wishes clear. The Massachusetts intestacy laws are complex because family structures are complex; how someone’s estate gets divided up depends on whether they have a surviving spouse and/or surviving parent.
This element of Massachusetts inheritance law probably won’t apply to you, assuming you have a valid will. Creating a will is critical if you plan to leave assets to grandchildren. They won’t automatically inherit anything from you if intestate succession laws apply.
Inheritance Tax
Here’s one piece of good news for Commonwealth residents and their heirs: Massachusetts inheritance laws don’t impose an inheritance tax. This is a kind of tax that may be levied on anyone who inherits assets from someone who dies. There’s no federal inheritance tax, and only six states—Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania—impose inheritance taxes as of 2020. It’s the decedent’s state of residency that determines whether inheritance taxes are owed. Even if you’re a Massachusetts resident planning to leave assets to someone who lives in one of those six states, they won’t be responsible for any inheritance taxes.
Estate Tax
While your heirs won’t pay inheritance taxes, the Massachusetts estate tax may still affect how much everyone inherits from you. We have both a federal estate tax and a Massachusetts estate tax. The federal estate tax only applies to high-value estates. (In 2020, only an estate worth $11.58 million or more owes estate taxes; this threshold rises to $11.7M in 2021.) The Massachusetts estate tax threshold is just $1 million per person, and isn’t increased each year. If your estate qualifies for the estate tax, that obligation has to be paid before assets can be divided up and distributed.
Planning for Massachusetts Inheritance Laws
Your vision for your property and assets won’t necessarily be honored by the courts after you die if you don’t undertake the proper estate planning now. Naturally, your will is a big part of this. If you don’t have one, or if it has any handwritten edits or otherwise needs to be updated, you really can’t afford to wait. I advise contacting your estate planning attorney right away.
As you think about passing your assets on to your loved ones, I also want to urge you to be careful about making large gifts. We don’t have a gift tax in Massachusetts, but the federal gift tax applies. Maybe you want to give a child or grandchild a significant sum while you’re still alive. If you make any gifts that exceed the federal annual gift tax exclusion ($15,000 for 2020 and 2021), the value of those gifts may be counted toward the value of your estate for estate tax purposes. Reach out to your estate planning attorney before making any such gifts.
As an experienced Massachusetts estate planning attorney, I know how daunting our inheritance laws can seem. The team at Ladimer Law is here to demystify these laws and help you plan for a smooth transfer of assets to the people you love the most. Contact me today!
Julie Ladimer is the founder of Ladimer Law. She has been helping people complete their estate planning since 2014. She has been named a Rising Star by Super Lawyers three years running and received a Boston Magazine Five Star Professional award.