Will My Spouse Have to Pay an Estate Tax If I Die First?

The only thing that’s certain about death is that we’ll all face it eventually. But the hows, whens, wheres, what happens next – for most people, those are all uncertainties. While those existential questions have no answers, sorting out the financial consequences of your death is doable in the here and now.

For married people especially, estate taxes are a cause of much confusion and consternation. When you die, will your spouse be hit with a big tax bill? Will the reverse happen to you if your spouse dies first? What happens when the surviving spouse dies?

To understand the answers to those questions, it’s important to first understand the provisions provided by the marital deduction. It’s a tax law that allows a person to leave his assets to his surviving spouse without the spouse being required to pay an estate tax. If, for example, a person left a house and a large inheritance to a friend, the friend might have to pay a hefty estate tax based on the value of the deceased’s estate. If the deceased leaves the estate to his or her spouse, no estate tax is required at that time.

So no, your spouse won’t have to pay an estate tax if you die first. But that only means that any tax that’s owed on your joint estate will be passed along to whoever does inherit your property and money. And because the Massachusetts estate tax laws are not as generous as the federal laws, your descendants could lose a major chunk of your assets when both you and your spouse are gone.

But the marital deduction is only one piece of the estate tax puzzle. Each person is allowed an estate tax exemption. It’s basically a dollar figure, and an estate worth less than that amount is exempt from estate tax. There’s federal law about this, but each state also makes its own laws that apply to its residents.

The federal estate tax exemption is $11.2 million per person, as of 2018. Federal law allows for something called portability. Let’s say when spouse A dies, they leave behind very few individual assets. Because they didn’t “use” their exemption, the person’s $11.2 million exemption passes to their spouse. When spouse B dies, estate tax isn’t owed unless the estate is valued at more than $22.4 million – the total of their two exemptions.

Here in Massachusetts, the exemption is just $1 million per person. Any estate worth more than $1 million is subject to estate taxes. Massachusetts also doesn’t allow for portability. If spouse A dies and doesn’t use their exemption, it doesn’t roll over to the surviving spouse. Spouse B’s estate is only allowed the standard $1 million exemption.

If that sounds confusing, we get it! Estate tax law is notoriously complicated, especially in Massachusetts. That’s why you need the help of attorneys who can demystify the estate planning process, and who are willing to explain what’s happening and answer questions at every step. Our attorneys can help you plan for the future so that your loved ones gets as many of your hard-earned assets as possible. Contact Ladimer Law today to get started.