Call: 781.996.5656
781.996.5656
info@MBAKERLaw.com        COVID-19: Phone and Virtual Consultations Available
Baker Law Group P.C. – Estate PlanningBaker Law Group P.C. – Estate PlanningBaker Law Group P.C. – Estate PlanningBaker Law Group P.C. – Estate Planning
  • Home
  • Practice Areas
    • Estate Planning
      • Overview
      • Estate Planning Attorneys
      • High Net Worth Estates
      • Asset Protection
      • Durable Powers of Attorney
      • Homestead Declaration
      • Trust Types Explained
      • Retirement Accounts
      • Healthcare Proxy / Medical Directive
      • Living Wills
    • Elder Law
      • Overview
      • Asset Protection and Elder Law
      • Life Estate Deed
      • Masshealth / Medicaid
      • Long-Term Care / Nursing Home
      • VA Benefits
      • FAQS for Elder Law (MA)
      • Elder Law Attorneys
    • Trust, Will & Estate Administration
      • Overview
      • Estate Administration Wrongful Death
      • Federal Estate Tax
      • Probate Attorneys FAQ
    • Guardianship and Conservator
      • Guardianship Attorney
    • Premarital Agreements
    • Business Planning
      • Selecting a Business Structure
      • Business Asset Protection
      • Limited Liability Company (LLC)
    • Massachusetts Lottery Trusts
  • Baker Law Group
    • About Us
    • Attorney Profiles
  • Client Reviews
  • Blog
  • Media
  • Contact Us
  • 781-996-5656

What to Know about Federal Estate Taxes

    Home Asset Protection What to Know about Federal Estate Taxes
    NextPrevious
    Man using his laptop to search for online info

    What to Know about Federal Estate Taxes

    By Michael Baker | Asset Protection, Financial Management | Comments are ClosedDecember 28, 2020 | 0

    The federal estate tax is a type of tax that applies only to large, valuable estates. It is levied when those estates’ assets pass from a decedent to their heirs and beneficiaries.

    There is a federal estate tax that applies to all estates of a certain value (see below), and some states also implement their own estate tax.  Here in Massachusetts, a separate state estate tax applies to those decedent’s estates that exceed $1,000,000, significantly smaller than those subject to the federal estate tax discussed below. Read more about Massachusettes Estate Tax.

    The federal estate tax will not apply to the vast majority of people, but if you are wealthy and have a large estate, you could find yourself near or above the exemption limit. So, let’s take a look at everything you should know about the federal estate tax and how it could affect your estate planning.

    Estate Tax Exemption Limits

    As of 2020, the exemption limit for federal estate taxes is $11.8 million, up from $11.4 million in 2019. That exemption limit doubles for married couples. What this means is the federal estate tax is only applied to an estate’s fair market value that exceeds that exemption limit; everything up to that point can be passed on to your heirs tax-free.

    When the Tax Cuts and Jobs Act was enacted into law in December 2017, it significantly increased the federal exemption limit for the estate tax, which previously had been set at $5.49 million. This allowed many people whose estates had previously been on the cusp of the exemption limit to breathe a little easier and avoid having to take steps to shrink their estate value.

    Federal Estate Tax Rates

    The rates you can expect to pay for an estate tax vary based on the taxable value of your estate. The highest marginal rate is 40 percent, applicable for people whose estate value is greater than $1 million over the exemption limit. So, for an individual, that means all value over $12.8 million would be taxed at 40 percent.

    There are 12 “brackets” and different marginal rates in total, and the higher your estate value, the higher the marginal rate you will pay.

    Estate Tax vs. Inheritance Tax

    It should be noted that there is a difference between the estate tax and the inheritance tax.

    The estate tax is a tax for the privilege of transferring property to heirs, and the deceased party’s estate is liable for paying the tax.

    The inheritance tax is a tax on the privilege of receiving property from the deceased, and the heir is responsible for the tax instead of the estate. Inheritance taxes are not levied at all on the federal level, but there are six states that have an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.  Massachusetts does not have an inheritance tax.

    Steps to Reduce Federal Estate Tax

    If your estate is near or exceeds the estate tax threshold, we suggest that you contact an estate planning attorney to determine if, and how, you can lawfully reduce your tax liability.

    Baker Law Group offers an integrated approach to financial planning and estate planning. Contact us for more information about planning your estate around the estate tax.

    To schedule a complimentary initial consultation:

    Complete Online Form or

    781-996-5656 Call

    info@MBakerLaw.com Email

    Asset Protection, Estate Tax, Tax Returns

    Related Post

    • Plan ahead with a trust. Happy parents giving children a piggyback and laughing in the living room.

      Can a Trust Help Me Reduce Taxes?

      By Michael Baker | Comments are Closed

      If you have a high-value estate, one of the main considerations of your estate planning might be what you can do to reduce your potential estate tax liability. Trusts can be used in certain waysRead more

    • Senior Father With Adult Daughter Enjoying Autumn Walk

      Avoiding Massachusetts Estate Tax if You’re Close to the Threshold

      By Michael Baker | Comments are Closed

      As you may know, estates in Massachusetts may be subject to an estate tax. The tax rate varies, starting at 0.8% and topping out at 16% for estates worth more than $1 million—even if theRead more

    • Close up of estate tax return with a fountain pen

      What You Should Know About the Massachusetts Estate Tax

      By Michael Baker | Comments are Closed

      When a loved one passes away, it’s difficult enough without having to sort out emotionally fraught estate issues. Plus, there are laws that govern the transfer of property which can make everything more complicated whileRead more

    • This modern home can be put into a trust to avoid the probate process

      Should I put my Home in a Trust? Investments?

      By Michael Baker | Comments are Closed

      The estate planning process allows you to take control over what will happen to your assets after you die, including high-value assets like your home and investments. You might find, however, that simply using aRead more

    • A couple in their home working on an estate plan on their laptop computer

      What is an Irrevocable Trust?

      By Michael Baker | Comments are Closed

      An irrevocable trust is a specific category of trust with terms that cannot be changed or modified in any way without the express permission of the grantor’s beneficiaries. By placing assets into the trust, theRead more

    NextPrevious

    Schedule a Free Consultation

    • This field is for validation purposes and should be left unchanged.

    Recent Posts

    • When Can an Estate Be Distributed to Heirs?
    • What Does it Cost to Probate an Estate?
    • Avoid the Gift Tax by Paying for Education or Health Care
    • What to Do With Your Stimulus Check if You Are in a Nursing Home

    BLOG Article Categories:

    Explore Baker Law Group P.C.

    Estate Planning

    Elder Law

    Trusts, Wills and Estate Administration

    Guardianship and Conservator

    Premarital Agreements

    Business Planning

    Boston/South Shore Office

    72 Sharp St, Suite A5
    Hingham, Massachusetts 02043
    800-701-0352
     
    View Map/Directions
    Write a Review

    MetroWest/Boston Office

    841 Washington Street
    Holliston, Massachusetts 01746
    800-701-0352
     
    View Map/Directions
    Write a Review

    Southeastern MA Office

    130 Liberty Street, Suite 2A
    Brockton, Massachusetts 02301
    800-701-0352
     
    View Map/Directions
    Write a Review

    Plymouth/Cape Cod Office

    36 Cordage Park Circle, Suite 217
    Plymouth, Massachusetts 02360
    800-701-0352
     
    View Map/Directions
    Write a Review
    DISCLAIMER: Material presented on the this website is intended for information purposes only. It is not intended as professional advice and should not be construed as such. The services of a competent professional should be sought if legal or other specific assistance is required. Some links within this website may lead to other sites and Baker Law Group, P.C. does not necessarily sponsor, endorse or otherwise approve of the materials appearing in such sites.

    • Home
    • Practice Areas
      • Estate Planning
        • Overview
        • Estate Planning Attorneys
        • High Net Worth Estates
        • Asset Protection
        • Durable Powers of Attorney
        • Homestead Declaration
        • Trust Types Explained
        • Retirement Accounts
        • Healthcare Proxy / Medical Directive
        • Living Wills
      • Elder Law
        • Overview
        • Asset Protection and Elder Law
        • Life Estate Deed
        • Masshealth / Medicaid
        • Long-Term Care / Nursing Home
        • VA Benefits
        • FAQS for Elder Law (MA)
        • Elder Law Attorneys
      • Trust, Will & Estate Administration
        • Overview
        • Estate Administration Wrongful Death
        • Federal Estate Tax
        • Probate Attorneys FAQ
      • Guardianship and Conservator
        • Guardianship Attorney
      • Premarital Agreements
      • Business Planning
        • Selecting a Business Structure
        • Business Asset Protection
        • Limited Liability Company (LLC)
      • Massachusetts Lottery Trusts
    • Baker Law Group
      • About Us
      • Attorney Profiles
    • Client Reviews
    • Blog
    • Media
    • Contact Us
    • 781-996-5656
    MBAKERLaw.com Copyright 2020 Baker Law Group Privacy Policy | Site by: BWG | All Rights Reserved

    Keep Exploring

    Home   Attorneys   Practices   Blog   Contact Us
    • Home
    • Practice Areas
      • Estate Planning
        • Overview
        • Estate Planning Attorneys
        • High Net Worth Estates
        • Asset Protection
        • Durable Powers of Attorney
        • Homestead Declaration
        • Trust Types Explained
        • Retirement Accounts
        • Healthcare Proxy / Medical Directive
        • Living Wills
      • Elder Law
        • Overview
        • Asset Protection and Elder Law
        • Life Estate Deed
        • Masshealth / Medicaid
        • Long-Term Care / Nursing Home
        • VA Benefits
        • FAQS for Elder Law (MA)
        • Elder Law Attorneys
      • Trust, Will & Estate Administration
        • Overview
        • Estate Administration Wrongful Death
        • Federal Estate Tax
        • Probate Attorneys FAQ
      • Guardianship and Conservator
        • Guardianship Attorney
      • Premarital Agreements
      • Business Planning
        • Selecting a Business Structure
        • Business Asset Protection
        • Limited Liability Company (LLC)
      • Massachusetts Lottery Trusts
    • Baker Law Group
      • About Us
      • Attorney Profiles
    • Client Reviews
    • Blog
    • Media
    • Contact Us
    • 781-996-5656
    Baker Law Group P.C. – Estate Planning