Massachusetts is one of only 12 states across the U.S. where wealthy residents may be expected to pay both federal and state estate taxes. Both of these types of estate taxes have gone through changes this year, so if you and / or your partner own substantial assets, it is important to be aware of the changes and how you could manage your estate going forward. Your Boston estate attorney will be able to clarify the details of estate tax changes and suggest ways you can take advantage of them.
How federal estate tax change legislation has changed in 2025
Federal estate taxes are taxes that are calculated on any assets given away to heirs on death. Estate tax is only paid by owners of assets over a certain amount. Until this year when federal estate tax changes came into force as the result of legislation brought in by the Trump Administration, there was a cap on liability to pay federal estate tax set at $13,999,000 per individual. That meant that if that individual’s assets were worth more than $13,999,000, even just a dollar over that amount, federal estate tax was due to be paid on assets gifted to heirs following the death of the individual.
That amount has now been increased substantially as the result of the Trump Administration’s One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. The exemption for federal estate tax is now set at $15,000,000 per individual and $30,000,000 per couple. The exemption amount will also be increased annually in line with inflation and at present no sunrise clause has been announced. Sunset clauses in the past have meant that whatever exemptions have been declared may be subsequently reduced in amount on a certain date and the reduction can be significant. Of course, administrations don’t necessarily exist for ever and even within the time of a single administration, changes to tax can occur. However, the increase in estate tax exemption means that high worth individuals and couples in Massachusetts have a window of opportunity to strategically adjust their estate plan.
Even individuals and couples who at present own assets below the exemption amount may also take the opportunity to think more clearly about how their estate should be managed in the event that unforeseen increases in their assets over the near future puts them into the category of non-tax exempt.
Other changes to federal tax liability this year
The income tax brackets which were set in 2017 have now been made permanent and in so doing have made the management of income streams by individuals, estates and trusts more predictable. The upper federal tax bracket is now set at 37% and has been made permanent.
The Generation-Skipping Transfer (GST) exemption has been increased in line with the estate tax exemption to $15,000,000 per individual and like the estate tax exemption cap will be adjusted annually for inflation.
Massachusetts state estate tax changes that you should be aware of
Massachusetts, as well as 11 other states and the District of Columbia, impose estate taxes that are separate from federal estate taxes. This double tax burden means that any changes in the state’s estate tax laws should be studied closely by residents in the process of establishing a suitable estate plan.
The state’s own estate tax is payable 9 months after the death of a resident of the state who had assets of more than $2 million on the date of that individual’s death. This tax exemption has in fact doubled from the amount before January 1, 2024, when the cap was only a million dollars.
More importantly, the estate tax exemption now only applies to dollar amounts over the exemption amount, which is a change from the original tax rule that meant that over the 1million dollar exemption limit, estate taxes were calculated on the total assets. Now, estate taxes will only be levied on assets amounts over the 2 million dollar limit. For example, back in 2022, if you had assets declared at $1,000,001, then tax would be levied on that total amount, whereas if you only had $999,999 on the date of your death, you would be exempt from paying state estate taxes.
The change in state estate tax rules now mean that a graduated tax is levied on any assets gifted over 2 million dollars, not the full amount. The tax for estates just over the 2 million dollar exemption limit is 7.2%, while for estates of $10 million or more attract a 16% tax rate. For example, if your taxable estate is calculated at $2,240,000, taking into account both assets and debts and other liabilities and death related expenses, then you would be expected to pay $23,200, but if your taxable estate was only $1,990,000, then you would not be liable for state estate taxes (and, incidentally, federal estate taxes as well).
How estate planning can help minimize estate tax liability
It is evident that if your assets are substantial and without astute planning, your estate would be expected to contribute significant amounts of state, and possibly, federal estate taxes as well. A Boston estate planning attorney will be able to help you calculate your potential liability on death and help you minimize or avoid tax commitments which would reduce the amount you would be able to pass on to your chosen beneficiaries. For example, assets calculated on the death of the first spouse would normally be transferred to the other surviving spouse, if there was one, without state taxes being payable. The surviving spouse, however, would be potentially liable for estate taxes on their own death. Amounts paid to charities are also free of estate tax, so if your entire estate was left to a charity on your death, then again no estate tax would be payable.
Your attorney will also be able to explain other aspects of state estate tax law that applies to the creation of trusts and residency rules that can affect whether and how much your assets might be liable for estate tax liability and how this liability can be minimized or avoided.
For more information, visit our website or contact us for a free initial legal consultation today.