Estate Tax Overview

Learn more about estate tax in Massachusetts.

Introduction

The estate tax is a tax on the value of the decedent's estate before distribution to any beneficiary.

For estates of decedents dying in 2006 or after, the applicable exclusion amount is $1,000,000. Future changes to the federal estate tax law will have no impact on the Massachusetts estate tax.

Definitions

Credit for State Death Taxes: A credit, formerly allowed by the federal government, that reduced the amount of federal estate tax paid by an estate. To qualify for the credit, the estate must have paid the allowable amount to a state or states

Domicile: A person's permanent and principal home.

Intangible Property: Property that does not have value in itself, but represents the value such as stocks, bank accounts, insurance, and pensions.

Lien: A legal claim by the Commonwealth that automatically arises on all property taxable in the Massachusetts estate on the date of death.

Massachusetts Estate Tax: The amount of the federal credit for state death taxes, or the portion thereof, computed using the Internal Revenue Code in effect on December 31, 2000, that is paid to Massachusetts.

Nonprobate Property: Property owned by or in which the decedent had an interest on the date of his or her death and which passes by provisions other than by will or the laws of intestacy such as assets held jointly or by a trust, life insurance not payable to the estate, etc.

Personal Representative: This term includes successor personal representative, special personal representative, persons who perform substantially the same function under the law governing the status, executor, administrator, and special administrator. For appointments after March 31, 2012, the terms executor and administrator were replaced with personal representative. "General personal representative" excludes special personal representative.

Person in Possession: Any person in actual or constructive possession of any property of the decedent, including probate and nonprobate property such as jointly owned assets or life insurance.

Probate Property: All assets that were owned by the decedent in his or her name alone or as a tenant in common on the date of his or her death and that pass by will or by the laws of intestacy.

Resident: Any person whose permanent and principal home is in the Commonwealth.

Tangible Personal Property: Property that is movable and has a visible existence and a value of its own, such as automobiles, boats, equipment, furniture, jewelry, coin collections, and silver.

Filing and Payment Information

Who must file, and how is it done?

For dates of death on or after January 1, 2006, the personal representative of a decedent who was a domiciliary of Massachusetts must file a Massachusetts Estate Tax Return (Form M-706) if the gross value of an estate, plus adjusted taxable gifts, exceeds the applicable exclusion amount of $1,000,000.

The filing requirement for a nonresident decedent who owned or transferred real estate or tangible personal property located in Massachusetts is the same as for a resident and is based on their total worldwide estate plus adjusted taxable gifts. The personal representative of the estate of a nonresident decedent who owned or transferred real estate or tangible personal property located in Massachusetts must file a Massachusetts Nonresident Decedent Affidavit (Form M-NRA) with Form M-706. This can be filed using MassTaxConnect.

A personal representative may be held personally liable for payment of any tax shown on the return if it is not otherwise paid. Effective December 5, 2016, Massachusetts Estate Tax Return (M-706) was revised and can be filed by entering information online with MassTaxConnect.

Filing with MassTaxConnect will result in faster processing, a quicker generation of the Massachusetts Estate Tax Closing Letter and the Certificate Releasing Massachusetts Estate Lien. The return and tax payment can also be sent to:

     Massachusetts Department of Revenue
     P.O. Box 7023
     Boston, MA 02204

Mailing the M-706 and payments may delay the processing and review process.

Who is considered the executor for purposes of the Massachusetts estate tax?

A personal representative is the person appointed, qualified and acting within Massachusetts.  If there is no personal representative appointed, qualified and acting within Massachusetts, then any person in actual or constructive possession of any property of the decedent. The terms executor and administrator were replaced with personal representative effective for appointments after March 31, 2012.

When must the return be filed?

Where the gross estate exceeds the filing threshold of $1,000,000, the return and tax payment are due nine months after the date of the decedent's death.

Can an extension of time to file be granted?

As of December 5, 2016, all filers of estate tax returns will be automatically granted an extension of time to file their tax returns as long as they have paid at least 80% of the total amount of tax ultimately due on or before the payment due date. See TIR 16-10: Simplified Extension Process for Individuals, Fiduciaries, Partnerships, and Estates for more information. Failure to pay at least 80% of the amount of tax finally determined to be due on or before the due date will void any extension of time to file. The return will be subject to the late filing penalty and, possibly, the late payment penalty. Interest is due on any unpaid tax from the original due date.

Please see "What happens if the return is late?" for more information on interest rates.

Can an extension of the payment due date be granted?

By filing a Massachusetts Estate Tax Extension Application (Form M-4768), an extension of time to pay may be granted for a reasonable period, not to exceed six months. However, when an extension of time to pay is granted, interest on any unpaid tax accrues from the original due date. An extension is granted only for reasonable cause. An extension of up to three years from the due date may be granted upon a showing of undue hardship.

What happens if the return is late?

Failure to file a required return within nine months from the date of death or within an approved period of extension will result in penalties and interest being applied at the following rates:

  • Late Filing Penalty - 1% per month (or fraction thereof) to a maximum of 25% of the tax as finally determined to be due.
  • Late Payment Penalty - 1% per month (or fraction thereof) to a maximum of 25% of the tax reported as due on the return.
  • Interest - The Massachusetts interest rates for underpayments and overpayments of state taxes can change each calendar quarter. If you wish to obtain information on these rates, please call DOR's Customer Service Bureau at (617) 887-2733 or toll-free in Massachusetts at (800) 392-6089. 

There are other consequences beyond these penalty and interest charges. At the time of death, a lien automatically arises by operation of law on all real estate owned by a decedent, either alone or jointly held. Failure to file a Form M-706, Massachusetts Estate Tax Return (and a Form M-NRA, Massachusetts Nonresident Decedent Affidavit, for nonresidents) will prevent the issuance of a Certificate Releasing Massachusetts Estate Lien (formerly M-792 ). A release of lien is necessary to obtain clear title and to sell or otherwise transfer ownership of the real estate.

When is a release of lien necessary?

For dates of death on or after January 1, 1997, if the amount of the gross estate requires the filing of a Massachusetts estate tax return, a Certificate Releasing Massachusetts Estate Lien is necessary for real estate owned jointly or as tenants by the entirety, real estate held in trust and other real estate that is not part of the probate inventory but is includible in the gross estate. Certificate Releasing Massachusetts Estate Lien may be required for probate and nonprobate real estate where there is a sale pending or mortgage commitment, and no closing letter has been issued.

If the return was filed previously, the taxpayer should forward a copy of the purchase and sale agreement or mortgage commitment and indicate that a return was filed in order to expedite issuance of Certificate Releasing Massachusetts Estate Lien.

Where the return has not yet been filed, an Application for Certificate Releasing Massachusetts Estate Tax Lien (Form M-4422) may be filed, provided both of the following conditions exist:

  • The transaction is occurring sooner than nine months after the decedent's death, or later than nine months if the estate is filing during the time allowed by an approved extension of time to file M-706; and
  • There is an executed purchase and sale agreement (or mortgage commitment) for real estate which is includible in the decedent's estate.

The Form M-4422 was revised, and can now be filed by entering information electronically through MassTaxConnect. Filing through MassTaxConnect will result in faster processing and quicker release of the Certificate Releasing Massachusetts Estate Lien. By filing on MassTaxConnect, the estate can print the Certificate Releasing Massachusetts Estate Lien.

The application must be filed with an attested copy of the deed, a copy of the purchase and sale agreement or mortgage commitment, and payment of the estimated amount of the tax due. A completed Form M-706 (and a Form M-NRA for nonresidents) still must be filed within nine months of the date of death or during the time allowed by an approved extension of time to file Form M-706.

How can a personal representative or other fiduciary obtain a release of lien on real estate when there is no Massachusetts estate tax filing requirement?

For estates of decedents dying on or after January 1, 2003, an affidavit of the personal representative, subscribed to under the pains and penalties of perjury, recorded in the registry of deeds and 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. DOR does not publish blank affidavits for filing in the registry of deeds.

For the estates of decedents dying on or after January 1, 2006 that equal or exceed the Massachusetts filing requirement of $1,000,000, the Commissioner of Revenue will release the lien with respect to property if the Commissioner is satisfied that the collection of the tax will not be jeopardized. The Commissioner will release the lien by issuing Certificate Releasing Massachusetts Estate Lien.

What documents must accompany Form M-706?

Various documents must be filed with the return. Failure to file these documents will delay the return's processing. The major supporting documents required to be filed with the Massachusetts Estate Tax Return (Form M-706), where applicable, are:

  • An executed copy of the federal estate tax return, Form 706 with a revision date of July 1999, including all schedules, including the death certificate, are described in General Instructions, Section I, Supplemental Documents of the Form 706 instructions (with a revision date of July 1999) and in the instructions for various schedules of Form 706. All estates must file a copy of the federal Form 706 with a revision date of July 1999 when filing Form M-706. If the estate is required to file a current federal Form 706, include a copy of that return, in addition to Form 706 (with a revision date of July 1999) and the Form M-706. If some or all of the schedules for the July 1999 revision of Form 706 and the current version of Form 706 are the same, submit one set of schedules.
  • A Federal Closing Letter must be submitted to DOR within two months of receipt, if the filing of Form 706 is required. This includes both the federal letter of acceptance and line adjustments, if any. Copies of federal changes must be accompanied by an amended Form M-706. No Massachusetts Estate Closing Letter will be issued without a copy of the Federal Closing Letter.
  • A Massachusetts Nonresident Decedent Affidavit (Form M-NRA) for the estates of nonresident decedents.

How must property included in the estate be valued?

All property includible in the gross estate is reported at its fair market value on the date of the decedent's death or on the alternate valuation date six months later. Special Internal Revenue Service rules apply to the Qualified Family-Owned Business Interest Deduction (Schedule T on the July 1999 revision of the federal Form 706) and the Qualified Conservation Easement Exclusion (Schedule U on the July 1999 revision of the federal Form 706). For more information on these rules, please contact the Estate Tax Unit at (617) 887-6930.

What property must be included in the gross estate?

The gross estate for estate tax purposes includes all property in which the decedent had an interest. It also includes:

  • Certain transfers made during the decedent's life without an adequate and full consideration in money or money's worth
  • Annuities
  • Joint estates with right of survivorship
  • Tenancies by the entirety
  • Life insurance proceeds (even though payable to beneficiaries other than the estate)
  • Property over which the decedent possessed a general power of appointment
  • Dower or curtesy (or statutory estate) of the surviving spouse
  • Community property to the extent of the decedent's interest as defined by applicable law.

How is the Massachusetts estate tax computed?

The Massachusetts estate tax for the estates of residents and nonresidents is computed with reference to the allowable federal estate tax credit for state death taxes formerly allowed in the Internal Revenue Code in effect on December 31, 2000. If an estate consists solely of property subject to Massachusetts estate taxation, it pays to Massachusetts an amount equal to the federal credit for state death taxes computed using the Internal Revenue Code in effect on December 31, 2000. The federal rate table used to compute the credit for state death taxes is set out in the next section.

In the case of a resident of Massachusetts who owned or transferred real estate or tangible personal property located outside of Massachusetts, Massachusetts grants a credit for estate or inheritance taxes properly paid to other states. In these cases, the Massachusetts estate tax is the amount of the federal credit for state death taxes minus the lesser of:

  • The total of the amount of all estate, inheritance, legacy and succession taxes actually paid to other states for property owned by the decedent or subject to those taxes in connection with the estate; or
  • The amount equal to the proportion of the allowable credit as the value of the properties taxable by other states bears to the value of the entire federal gross estate wherever situated. This calculation is made as follows:
    • (Gross value of property taxed by other states ÷ Federal gross estate) × Credit for state death taxes

In the case of a nonresident of Massachusetts who owned or transferred real estate or tangible personal property located in Massachusetts, use the Massachusetts Estate Tax Return (Form M-706) to compute the amount payable to Massachusetts. The amount of the Massachusetts nonresident estate tax is the proportion of the allowable credit from the federal estate tax return that the gross value of the Massachusetts property bears to the entire federal gross estate wherever situated. This calculation is made as follows:

(Gross value of real property and tangible personal property in Massachusetts ÷ Federal gross estate) × Credit for state death taxes.

Can the tax liability be adjusted after Form M-706 is filed?

A taxpayer who believes the assessed tax liability is in excess of the amount properly due may submit an amended return.

An estate may be a party to litigation that may reduce the amount of the Massachusetts estate tax and the litigation will not be resolved before the expiration of the statutory period allowed for filing an application for abatement. In those cases, an estate cannot file a substantiated abatement because the result of the litigation is unknown. In order for an estate to preserve its ability to claim additional debts and expenses related to the litigation, the estate may request DOR to extend the period for the assessment of estate tax. The statute extension also extends the period of time to file an application for abatement, or an amended return. A statute date is extended using a Form EET-1, Consent Extending Period for Assessment of Estate Tax. Such an extension request must be renewed annually with an update from the estate representative to DOR on the status of the pending litigation. A taxpayer also may request settlement consideration by filing an Appeals Form (Form DR-1) with DOR's Office of Appeals. More information about the appeals process is contained in A Guide to the Department of Revenue: Your Taxpayer Bill of Rights.

Computation of Maximum Federal Credit for State Death Taxes

The following table is used to compute the credit for state death taxes under Internal Revenue Code Section 2011 in effect on December 31, 2000.

Adjusted taxable estate *
From To Credit + % of Excess over

$0

$40,000

$0

0.0

$0

40,000

90,000

0

0.8

40,000

90,000

140,000

400

1.6

90,000

140,000

240,000

1,200

2.4

140,000

240,000

440,000

3,600

3.2

240,000

440,000

640,000

10,000

4.0

440,000

640,000

840,000

18,000

4.8

640,000

840,000

1,040,000

27,600

5.6

840,000

1,040,000

1,540,000

38,800

6.4

1,040,000

1,540,000

2,040,000

70,800

7.2

1,540,000

2,040,000

2,540,000

106,800

8.0

2,040,000

2,540,000

3,040,000

146,800

8.8

2,540,000

3,040,000

3,540,000

190,800

9.6

3,040,000

3,540,000

4,040,000

238,800

10.4

3,540,000

4,040,000

5,040,000

290,800

11.2

4,040,000

5,040,000

6,040,000

402,800

12.0

5,040,000

6,040,000

7,040,000

522,800

12.8

6,040,000

7,040,000

8,040,000

650,800

13.6

7,040,000

8,040,000

9,040,000

786,800

14.4

8,040,000

9,040,000

10,040,000

930,800

15.2

9,040,000

10,040,000

----

1,082,800

16.0

10,040,000

*The "adjusted taxable estate" used in determining the allowable credit for state death taxes in the above table is the federal taxable estate (total federal gross estate minus allowable federal deductions) less $60,000.

No credit for state death taxes is allowable if the "adjusted taxable estate" is $40,000 or less.

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