Senior Associate
Massachusetts residents may owe state estate tax even if their estate is far below the federal estate tax threshold. In 2026, the federal estate tax exemption is $15 million per person, while Massachusetts continues to impose its own estate tax on estates exceeding $2 million.
That difference catches many families by surprise. If your assets have grown over the years through real estate, retirement accounts, investments, or a family business, your estate may be subject to Massachusetts estate tax even though no federal estate tax would apply. Understanding how the two systems work together can help you make informed planning decisions.
What Is the Massachusetts Estate Tax in 2026?
Massachusetts imposes an estate tax on estates with a taxable value exceeding $2 million. Unlike the federal system, the state’s exemption is much lower, making it more likely that middle and upper-middle-income families could have estate tax exposure.
For many Massachusetts residents, a home, retirement savings, investment accounts, life insurance, and other assets can easily approach or exceed this threshold.
While every estate is different, the value of your estate generally includes property you own or control at the time of your death. Determining whether estate tax applies requires a careful review of your assets and how they are titled.
What Are the Federal Estate and Gift Tax Rules for 2026?
Federal estate tax rules are significantly different.
For 2026:
- The federal estate and gift tax exemption is $15 million per individual.
- Married couples may effectively shield up to $30 million, depending on their planning and the use of portability.
- The annual federal gift tax exclusion remains $19,000 per recipient.
Most families will not owe federal estate tax because of these high exemption amounts. However, federal rules still play an important role in estate planning because taxable lifetime gifts can affect future tax calculations and reporting requirements.
How Do Massachusetts and Federal Estate Taxes Work Together?
Many people assume that if they are exempt from federal estate tax, they are exempt from Massachusetts estate tax as well. That is not the case.
Massachusetts has its own estate tax system with different rules and a much lower exemption amount. As a result:
- You may owe Massachusetts estate tax even when no federal estate tax is due.
- Federal estate planning strategies, such as trusts and lifetime gifting, may still provide benefits for Massachusetts residents.
- Both state and federal rules should be considered when reviewing your estate plan.
Because the rules differ, estate planning documents should be reviewed periodically to ensure they continue to meet your family’s goals while taking current tax laws into account.
Does Massachusetts Have a Gift Tax?
No. Massachusetts does not impose a separate state gift tax.
However, that does not mean lifetime gifts have no effect. Federal gift tax rules still apply, and certain taxable gifts are considered when determining the Massachusetts taxable estate. In addition, federal gift tax reporting requirements may apply if gifts exceed the annual exclusion amount, even when no gift tax is ultimately owed.
If you are considering making substantial gifts to children, grandchildren, or other beneficiaries, it is wise to discuss the potential tax implications before transferring assets.
When Should You Review Your Estate Plan?
Even if you already have a will or trust, changes in tax laws and your financial circumstances may make an update worthwhile.
You should consider reviewing your estate plan if:
- Your estate has grown in value.
- You purchased or sold real estate.
- You inherited significant assets.
- You got married or divorced.
- You welcomed children or grandchildren.
- Your existing estate plan is several years old.
Regular reviews help ensure your documents reflect current laws and your wishes.
Plan Ahead Before Tax Issues Become a Problem
Estate tax planning is about more than reducing taxes. It also helps ensure your assets are transferred according to your wishes and that your family has a clear plan in place.
At LaFountain & Wollman, P.C., we help Massachusetts families review their estate plans in light of changing state and federal tax laws. Whether you are creating your first estate plan or updating existing documents, we will explain your options and recommend strategies that fit your goals. Contact us today to schedule a consultation and review whether your current estate plan is still working for you.