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Summary of Estate Planning Basics

The Will

A Will is a set of written directions from you to your executor explaining how you want your property distributed after your death.  In Massachusetts, two adults must witness a Will.  If a witness is also a beneficiary, the Will is valid, but the provisions benefitting the witness are null and void.  Your Will only controls the distribution of your probate property.

What happens if you die without a Will?

If you die without a properly executed Will, state intestacy law directs how your probate property is distributed.  Since there is no assurance that state law will direct the distribution of your  property in the manner you desire, it is important to have a property executed Will, even if you do not need any of the more complex estate planning instruments.

Estate and Gift Taxes


For federal estate tax purposes, estates under $5,000,000 are not subject to tax in 2011 – 2013.  Estates greater than $5,000,000 are taxed at thirty-five percent (35%) on any amount over $5,000,000 in 2011-2013.

Federal estate tax law allows each individual up to $5,000,000 (2011-2013) in assets to pass at death tax-free and an unlimited marital deduction.  Each person can give up the $5,000,000 in assets away during his or her life, free of gift or estate tax.  The estate and gift taxes are unified, so any lifetime gifts will decrease the applicable federal exclusion amount available at your death.  This is in addition to the annual exclusion from gift tax amount of $13,000 per person.  The unlimited marital deduction means that if you leave your entire estate to your spouse, it will pass tax-free upon the first spouse’s death.  The marital deduction, however, is merely a deferment of estate tax and will generally be taxed on the surviving spouse’s death.  Current law (2011-2013) allows a spouse’s unused federal applicable exclusion amount to carryover to a surviving spouse.  A proper and timely election on the spouse’s estate tax return is required.

Major changes to federal estate tax law made in 2001 and 2010 have increased the applicable exclusion amount, deunified, and subsequently reunified, the estate and gift taxes, as well as decreased the federal estate tax rate as follows:

Year                           Top Estate Tax Rate                    Exemption Amount

2002                                       50%                                         $1,000,000

2003                                       49%                                         $1,000,000

2004                                       48%                                         $1,500,000

2005                                       47%                                         $1,500,000

2006                                       46%                                         $2,000,000

2007                                       45%                                         $2,000,000

2008                                       45%                                         $2,000,000

2009                                       45%                                         $3,500,000

2010                                     repealed                                       unlimited

2011                                       35%                                         $5,000,000

2012                                       35%                                         $5,000,000

2013                                       35%                                         $5,000,000


There was a full repeal of the federal estate tax in 2010.  However, the full repeal was only in effect for the year 2010.  In 2010 only, the law replaced the stepped-up basis on assets given at death with carry-over basis.  This required heirs to keep track of the original basis of property.  That law allowed $1.3 million of basis to step-up for some assets and $3 million to step-up with regard to assets transferred to a surviving spouse.  This provision excludes property acquired by a decedent by gift from a non-spouse within three years prior to the decedent’s death.


The state death tax credit that had previously been allowed against the federal estate tax was phased out.  The law reduced the credit by 25% in 2002, 50% in 2003, 75% in 2004, and thereafter it is repealed and replaced by a deduction against the federal estate tax in place of the credit for the state death taxes paid.  It has been estimated that this will result in a loss of $50-$100 billion to the state over the next 10 years, or approximately 1.5% of the state’s tax collection.

Effective January 1, 2003, significant changes were made to the Massachusetts estate tax.  These changes are summarized in a memorandum updated January 16,2006.  Estates under $1 million are not subject to state estate tax.  Estates over $1 million are taxed at rates ranging from 8% to 16% for estate over $10 million.

Revocable or Living Trust

The revocable trust, sometimes referred to in the popular press as a “living trust”, is revocable and amendable.  The consequence of that retained control is that any income from assets which are transferred to the trust during the Grantor’s life are taxable to the Grantor.

The primary benefits to the use of a funded revocable trust are:

1)         Privacy, your estate plan and assets are not exposed to public record.

2)         Management of assets in the event of disability.

Probate v. Non-Probate Property

Property held as a joint tenant, i.e., real estate, bank accounts, will not pass through a Will but pass automatically to the surviving tenant.  Life insurance proceeds, revocable trust property, and retirement plan benefits (payable to a person or entity other than the estate) also are not part of a probate estate but are included, in whole or in part, in the estate for tax purposes.  The gross estate for estate tax purposes includes all property in which the decedent possesses an interest or exercises control of at death.


Gifting is one method used in estate planning to reduce the size of an estate.  An individual can give up to approximately $13,000.00 in money or property to each donee in each calendar year free of gift tax.  For federal estate tax purposes, there is a $5 million lifetime gift tax exclusion.  For Massachusetts, there is no gift tax.

Durable Power of Attorney

The Durable Power of Attorney can be invaluable as it allows the management of one’s affairs in the event of incapacity without requiring the appointment of a fiduciary by a court or requiring application to a court for permission to conduct certain transactions.  The named attorney is also given the power to consent to surgery or any other medical procedure or treatment, or withholding of the same.  I strongly advise the execution of a Durable Power of Attorney as well as a specific Durable Power of Attorney for the conveyance of real estate.

Health Care Proxy

The Health Care Proxy Statute, M.G.L. c 201D, allows an individual to designate an agent to make health care decisions in the event he or she cannot make or communicate his or her wishes.  Although the proxy will not be effective until a formal determination is made by the attending physician that he or she lacks the capacity to make or communicate health care decisions, it allows the individual to declare whether he or she wishes to be kept alive by artificial measures or die naturally.  The proxy may be revoked at any time, orally, in writing, or by act.  Any health care proxy should be given to the treating physician(s).

Living Will

Although Massachusetts does not formally acknowledge a Living Will (the enactment of the Health Care Proxy Statute was the Commonwealth’s response), I do advise execution of one along with the Health Care Proxy to add guidance and further express ones wishes regarding his or her health care agent and the court, if their religious beliefs are consistent therewith.

Last updated January 2011

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