Background: In response to the Economic Growth and Tax Relief Reconciliation Act of 2001, which amended certain provisions of the federal estate tax law, inter alia, to phase out the federal credit for state death taxes allowed by Internal Revenue Code ("Code") section 2011 and to raise the exemption amounts under section 2010, the Legislature acted to preserve the Massachusetts estate tax by "decoupling" Massachusetts from the federal estate tax phase-out. The decoupling is effective for the estates of decedents dying on or after January 1, 2003. This change makes the Massachusetts estate tax equal to the credit for state death taxes computed using the Code in effect on December 31, 2000. See TIR 02-18.

Beginning with deaths occurring in 2003, the filing thresholds and exempt amounts will be lower for Massachusetts estate tax purposes than for federal estate tax purposes. The filing thresholds and exempt amounts for federal and Massachusetts estate tax purposes for the estate of a decedent with no adjusted taxable gifts within the meaning of Code § 2001(b) are the following:



Year of Death Federal Filing Threhold and Exempt Amount Massachusetts Filing Threhold and Exempt Amount
2003$1,000,000$700,000
2004$1,500,000$850,000
2005$1,500,000$950,000
2006$2,000,000$1,000,000
2007$2,000,000$1,000,000
2008$2,000,000$1,000,000
2009$3,500,000$1,000,000
2010No tax$1,000,000
2011$1,000,000$1,000,000

For the estates of decedents with adjusted taxable gifts, the filing threshold and exempt amount must be individually determined for both Massachusetts and federal estate tax purposes.

Issue 1: For dates of death occurring on or after January 1, 2003, may an executor or other fiduciary elect a marital deduction for qualified terminable interest property ("QTIP") under Code section 2056(b)(7) for Massachusetts estate tax purposes but not for federal estate tax purposes?

Directive: For dates of death occurring on or after January 1, 2003, an executor or other fiduciary may elect a marital deduction for qualified terminable interest property for Massachusetts estate tax purposes. The executor or other fiduciary is not required to have made the same QTIP election for federal estate tax purposes in order to make the election for Massachusetts purposes.

Discussion of Law: For the estates of decedents dying on or after January 1, 2003, all references to the Internal Revenue Code are to the Code as in effect on December 31, 2000. See G.L. c. 65C, § 2A(e) as amended by St. 2002, c. 364, § 10. The December 31, 2000 Code allows an estate tax marital deduction for QTIP property provided the requirements of Code section 2056(b)(7) are met and therefore a marital deduction for Massachusetts estate tax purposes will be allowed. Section 2044 of the December 31, 2000 Code includes the value of QTIP property in the gross estate of the surviving spouse and the same result will occur for Massachusetts estate tax purposes.

There is no provision in G. L. c. 65C, § 2A that requires an estate to make the same election regarding a marital deduction for QTIP property for Massachusetts and for federal estate tax purposes. This result is similar to that provided for by G. L. c. 65C, § 3A, which allowed a QTIP marital deduction for the estates of decedents dying on or after January 1, 1986. It provided that an election, once made, was irrevocable and was separate from and independent of any election made by the executor for federal estate tax purposes. See G.L. c. 65C, § 3A(f) and TIR 86-4. Similarly, such an election for the estate of a decedent dying on or after January 1, 2003 will be irrevocable.

Issue 2: For dates of death occurring on or after January 1, 2003, how may an executor or other fiduciary obtain a release of the lien imposed by G. L. c. 65C, § 14?

Directive: For dates of death occurring on or after January 1, 2003, an affidavit of the executor or other fiduciary, subscribed to under the pains and penalties of perjury, recorded in the appropriate registry of deeds accurately stating that the gross estate of the decedent does not necessitate a Massachusetts estate tax filing, shall release the gross estate of the lien imposed by G. L. c. 65C, § 14.

For the estates of decedents dying on or after January 1, 2003 and exceeding the Massachusetts applicable credit amount for the year of death, the Commissioner may release, or give a partial discharge of, any lien imposed by G. L. c. 65C with respect to all or any part of the property subject to such lien, if he is satisfied that the collection of the tax will not be jeopardized.

Discussion of Law: For dates of death on or after January 1, 1997 and before January 1, 2003, the Massachusetts and federal estate tax filing thresholds were the same. This occurred because the federal gross estate for Massachusetts estate tax purposes was defined under the Code, as amended and in effect as of the date of death of the decedent. See G. L. c. 65C, § 2A(f) before amendment by St. 2002, c. 364, § 10. Effective for the estates of decedents dying on or after January 1, 2003, the Massachusetts estate tax filing thresholds will be lower than the federal estate tax filing thresholds until 2011, when the applicable credit amount for Massachusetts and federal estate tax purposes will again be the same. An affidavit of the executor or other fiduciary that refers only to the federal estate tax filing requirement for the gross estate of a decedent will not suffice for estates having a Massachusetts estate tax filing requirement but not a federal estate tax filing requirement.

Hence, for estates of decedents dying on or after January 1, 2003, an affidavit of the executor or other fiduciary, subscribed to under the pains and penalties of perjury, accurately stating that the gross estate of the decedent does not necessitate a Massachusetts estate tax filing is required to release the gross estate of the lien for estates that are less than the Massachusetts filing requirement for the year of death. For the estates of decedents that equal or exceed the Massachusetts filing requirement for the year of death, the Commissioner will release the lien with respect to property if he is satisfied that the collection of the tax will not be jeopardized. Once satisfied, the Commissioner will release the lien by issuing Form M-792, Certificate Releasing Massachusetts Estate Tax Lien.

/s/Alan LeBovidge
Alan LeBovidge,
Commissioner of Revenue


AL:DMS:sg

February 19, 2003

DD 03-2