Proposed Changes to the Massachusetts Estate Tax

By, Kerry Reilly, Esq.

On January 15, 2015, Representative Shawn Dooley ((R), 9th Norfolk), et al., sponsored H.R. 2489 (replacing current Section 2A under Mass. Gen. Laws Chapter 65C). A hearing on the bill took place on October 20, 2015. This bill would, among other things:

  1. Repeal the current Massachusetts estate tax threshold of $1,000,000 and tie that threshold to “50 percent of the basic exclusion amount as defined in Section 2010 of the [Internal Revenue] Code” for those individuals dying on or after January 1, 2016.
  2. Allow for the exclusion of the principal residence from the Massachusetts gross estate provided the decedent was a resident of Massachusetts at the time of his/her death. The definition of “Massachusetts gross estate” has been changed to include this election.
  3. Allow the surviving spouse to apply the deceased spouse’s unused exclusion amount to his/her gross estate.   This would bring the Massachusetts estate tax exclusion in line with Federal tax laws allowing portability of estate tax exclusions between spouses.
  4. The”principal residence” and DSUEA elections would be made by the decedent’s Personal Representative on the decedent’s Massachusetts estate tax return.
  5. Lastly, the proposed bill would also simplify the tax table used to determine the Massachusetts estate tax liability, as follows:
If the Massachusetts taxable estate is: Over………… But Not OverThe Massachusetts estate tax
shall be:
$0 – $5,000,00010% of the taxable estate
$5,000,000 – $10,000,000$500,000 plus 11% of the excess over $5,000,000
$10,000,000 – $20,000,000$1,050,000 plus 12% of the excess over $10,000,000
$20,000,000+$2,250,000 plus 13% of the excess over $20,000,000

As of October 29th, no additional action has been taken with respect to this proposed bill.

The full text of the proposed bill can be found here:

BBA Event Reminder: 11/3/15 – Resolving Domicile-Related Tax Disputes Efficiently

Topic: Resolving Domicile-Related Tax Disputes Efficiently: A Review of the Bank of America Decision, Other Recent Domicile-Related Case Law

When: Tuesday, November 3, 2015 12:00 PM to 1:00 PM

Where: Boston Bar Association16 Beacon Street, Boston, MA

Description: Hear a discussion of domicile as it relates to both individuals and fiduciaries.  The panelists will address importance of domicile for income and estate tax purposes, the Massachusetts definitions of domicile and residency, and facts and circumstances that are often considered in determining domicile.  Discussion will also address the recent Appellate Tax Board decision, Bank of America, N.A. v. Massachusetts Commissioner of Revenue, and potential implications and considerations. Finally, the discussion will include New Hampshire domicile considerations associated with fiduciaries.

Event Sponsor: Scott M. Susko of McDermott Will & Emery and Brian Marks of Ernst & Young LLP, co-chairs of the State and Local Tax Committee of the Tax Section

Details: For more information about this event, click here.

REMINDER 10/30/15: BBA CLE – Conflicts – They’re Not Just for Litigators!

CLE Title: Conflicts – They’re Not Just for Litigators!

Time: 9:00AM – 12:00PM

Location: Boston Bar Association, 16 Beacon Street, Boston, MA

Description: This program is designed to facilitate a meaningful discussion about the many conflicts that arise (or may arise) in the context of estate planning and fiduciary litigation.  The panelists will guide the practitioners through real examples and will discuss issues to identify and ways to approach drafting to avoid some of the potential conflicts.  The panelists will also talk about best practices regarding engagement letters and conflict waivers.

Information: For more event details, including accreditation, agenda, fees, and program materials, click here.

Sponsors: Co-Chairs of the Trusts & Estates CLE Committee: Kelly Aylward of Tarlow, Breed, Hart & Rdgers, P.C., Jaclyn O’Leary of Day Pitney, LLP, and Amiel Weinstock of Thomas Brady & Associates

Estate Planning Brownbag Series: When a Trust Owns Real Estate — Common Issues That Cause Problems With Title And How To Avoid Them

Program Date: Thursday, October 22, 2015

Panelist: Ward P. Graham, WFG National Title Insurance Co.

Program Chairs: Kerry L. Spindler, Goulston & Storrs PC  and Sara Goldman Curley, Nutter McClennen & Fish LLP, co-Chairs of the Trusts & Estates Section’s Estate Planning Brownbag Series

Materials:  To view the program materials, click on each of the following links:

Handout 1

Handout 2

Handout 3 (part 1)

Handout 3 (part 2)

Summary of Program Topic:  The program covered common issues causing problems with titles of property coming out of a trust, including termination of the trust, and changes in trustees.  The program also sought to clarify the function of a Trustee’s Certificate under MGL c. 184, § 35, and how it can and cannot be used.  The objective of the program was to allow attendees to identify and deal with common issues that affect title to real estate held in trust and the transfer or disposition of the real estate from the trust, and to allow attendees to better plan for trusts owning real estate.

Practice Fundamentals Series: Managing Your Practice – Forming an Estate Planning Practice and Engaging New Clients

Program Date: Wednesday, October 7, 2015

Panelists: Tiffany O’Connell of O’Connell Law, LLC, and Tamara Lauterbach Sturges of Egleson & Sturges, LLC

Program Chairs: Anne L. Warren of Brown Brothers Harriman & Co.,   Tamara Lauterbach Sturges of Egleson & Sturges, LLC, and Heidi Seely of Rackemann, Sawyer & Brewster, P.C.

Materials: Click here for panelists’ outline.

Program Topic:  Panelists discussed the different methods of setting up an estate planning practice, including practice management software, drafting templates, benefits of drafting software, marketing, networking and building a client base.

Basis Consistency Requirements

By, Susan A. Robb of First Republic Trust Company

On July 31, 2015, the President signed the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Highway and Transportation Funding Act of 2015, Part II”) into law. The new law, which extended the Highway Trust Fund expenditure authority, enacted Sections 1041(f) and 6035 of the Internal Revenue Code. These new rules address the basis of property received from a decedent and require personal representatives of taxable estates to provide a statement to both the IRS and to any person acquiring an interest in property included in the decedent’s gross estate for federal estate tax purposes.

Under the stepped up basis rules of § 1014, the basis of property acquired from a decedent is generally the property’s fair market value, either on the date of death or the alternate valuation date. In the past, beneficiaries receiving such property were not required to use the same value reported by the estate. Beneficiaries could claim the property’s fair market value (and therefore their basis) was higher than the estate tax value. § 1041(f) now provides that the basis of property received from a decedent shall not exceed the value of that property as finally determined for federal estate tax purposes or, if the value has not yet been determined for federal estate tax purposes, the value of that property as reported on a statement provided pursuant to § 6035.

The new law applies to property for which a federal estate tax return is filed after July 31, 2015. However, pursuant to Notice 2015-57, the § 6035 reporting requirements have been delayed until February 29, 2016. The delay should allow the IRS and Treasury Department to issue additional guidance regarding compliance with § 1041(f) and § 6035.

See Also: Internal Revenue Bulletin: 2015-36 (Notice 2015-57)




Bank of America, N.A. v. Massachusetts Commissioner of Revenue

By, Claire Carrabba of Clements Pajak LLC

In Bank of America, N.A. v. Massachusetts Commissioner of Revenue, the Appellate Tax Board determined that income received by certain foreign corporate trustees was subject to taxes under M.G.L. c. 62 § 10. The statute provides that trust income is subject to taxes if: (1) the income is received by trustees of a trust that was created by a Massachusetts inhabitant and has a trustee who is an inhabitant of Massachusetts; and (2) the income is accumulated for the benefit of Massachusetts inhabitants or for the benefit of unknown or unascertained beneficiaries. The parties disagreed over whether the corporate trustees were considered inhabitants of Massachusetts and thus subject to taxes under M.G.L. c. 62 § 10.

Although the corporate trustees had commercial domiciles in other states, the Board nonetheless considered them inhabitants of Massachusetts under M.G.L. c. 62 § 1(f) (2).   Because the corporate trustees did a substantial amount of business (operating and staffing physical offices, maintaining relationships with grantors and beneficiaries, administering and distributing trust assets, consulting with clients, reviewing trust instruments, and researching and discussing trust issues) in Massachusetts, they maintained a permanent place of abode as described in M.G.L. c. 62 § 1(f) (2) and were therefore subject to tax under M.G.L. c. 62 § 10.

Estate Planning Brownbag Series: Introduction to the Uniform Fiduciary Access to Digital Assets Act

Program Date: Friday, September 25, 2015

Panelist: Colin Korzec, Esq., Managing Director and Estate Settlement National Executive, U.S. Trust, Bank of America Private Wealth Management

Program Chairs: Kerry L. Spindler, Goulston & Storrs PC  and Sara Goldman Curley, Nutter McClennen & Fish LLP, co-Chairs of the Trusts & Estates Section’s Estate Planning Brownbag Series

Materials:  To view the program materials, click here.

Additional Resources: A link to the Revised Uniform Fiduciary Access to Digital Assets Act can be found here.

Summary of Program Topic: As the number of digital assets held by the average person increases, questions surrounding the disposition of these assets upon death or incapacity are becoming more common.  Few laws exist on the rights of fiduciaries over digital assets and few individuals consider the fate of their online presences once they are no longer able to manage their digital assets.

The situation regarding fiduciaries’ access to digital assets is unclear, and even fiduciaries who believe they have been granted access to digital assets may inadvertently run afoul of uncoordinated probate, privacy and computer hacking laws.  To the extent that there is existing legislation, such laws are disparate and differ with respect to the types of assets covered, the rights of the fiduciary, the category of fiduciary covered, and whether death or incapacity are covered.

The Uniform Law Commission has promulgated the Uniform Fiduciary Access to Digital Assets Act, which is intended to create a uniform approach among states so as to increase certainty and predictability for courts, account holders, fiduciaries and internet service providers.  Many states, including Massachusetts, are considering adoption of the uniform statute.  This program discussed the substance, pros, cons, evolution and controversies surrounding the statute.


Pfannenstiehl v. Pfannenstiehl

By: Jillian B. Hirsch, Leiha Macauley, and Darian M. Butcher, Day Pitney LLP

On August 27, 2015, the Massachusetts Appeals Court held in Pfannenstiehl v. Pfannenstiehl, Nos. 13-P-906, 13-P-686, & 13-P-1385, 2015 Mass App. LEXIS 123, that a husband’s interest in an irrevocable trust with an ascertainable standard is a “vested beneficial interest subject to inclusion in the marital estate.” This is a significant decision that could impact the way in which trusts and estates practitioners in Massachusetts draft estate plans for clients concerned about divorce protection.  To read full Alert, click here.