Federal and Massachusetts Estate Tax Returns

Benjamin Franklin said that the only certainties in life are death and taxes. For some, they come at the same time.

If a Massachusetts resident has over $1 million in assets upon their death (including the death benefits of their life insurance policies), then they must file a Massachusetts Estate tax Return (Form M-706), and pay an estate tax. The federal threshold is much higher, recently raised to $11 million, subject to periodic adjustment. The return (or request for extension) must be filed within nine months of the date of death.

An estate tax return is more complex than a standard income tax return. In addition to tallying the values of assets and debts, there are several other issues to address. Sometimes the Personal Representative/Executor must make special elections to gain preferable tax treatment on certain property. Sometimes a better result can occur if a beneficiary disclaims their right to part of their inheritance. If the decedent owned real estate, then an estate tax lien automatically attaches to the property, and a release must be obtained before a sale can occur.

Some property, such as real estate and closely-held businesses must be appraised to determine their taxable value. It may be unclear whether certain property is even a part of the taxable estate. Sometimes, even property that a decedent does not own will be part of their taxable estate.

It is important to seek professional advice soon if your loved one’s estate is facing an estate tax.