How Does Massachusetts Tax Estates of Non-Residents with In State Real Estate?
Question:
I have been a Florida resident for four years. My primary residence is in Florida, and I am out of Massachusetts for more than seven months a year. I still own three houses in Massachusetts with a combined value of about $3 million and my total estate is about $9 million. What is the approximate Massachusetts estate tax due on my passing?
Response:
You ask a good question because Massachusetts still has an estate tax and it taxes the estates of non-residents who leave real estate in Massachusetts. It does so proportionately. Here’s how it works:
About a third of your estate is in Massachusetts. The Massachusetts estate tax would be about $900,000 if you were a resident of the Commonwealth at your death. So, with a third of your estate being in Massachusetts, the tax would be a third of this amount, or about $300,000.
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If the real estate wants to be held in a realty trust or a limited partnership or an LLC how does that affect the include ability of the real estate for Massachusetts estate tax purposes.
There’s no case law directly on point, but the weight of opinion is that a realty trust has no effect — the property is still taxable — but a limited liability corporation or partnership should work because they turn the ownership interest into personal property which is not taxable in Massachusetts if in the estate of a non-resident decedent.
If you have a Florida shelter trust you can use to pay for a piece of real estate in Massachusetts , will the death tax be applie or not?
Without knowing more about the trust, I can’t answer for certain. But if it’s a revocable trust created by a Florida resident, it will be in her taxable estate at death. As such, it will be taxable in Massachusetts if the entire estate exceeds $1 million. You can read more on how this works here.