Planning for Life

Homestead Declaration Stands Up Despite Substantial Time Spent Out of State

Posted by Harry S. Margolis on November 30, 2021

By Harry S. Margolis

Local color Wharf reflections at sunrise in New England

Homestead declarations primarily come into play in the event of of bankruptcy. In such cases, they will protect the first $500,000 of equity in the home from claims of creditors. In order to qualify for the exemption, however, the homeowners must establish that the property serves as their residence. That's what was in question in the bankruptcy case of In re: Andrea A. Angera, Jr. (Civil Action Nos. 1:21-CV-10547-RWZ and 1:21-CV-10560-RWZ) (Nov. 4, 2021). a First Circuit Court of Appeals decision on an appeal of the bankruptcy court decision.

In the bankruptcy proceeding, after a three-day trial, Judge Melvin S. Hoffman (from whose law firm I sublet space several decades ago) found that although Andrea Angera spent most of his time for several years in Connecticut and Maine, his property in Martha's Vineyard remained his primary residence.

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Topics: homestead protections, estate taxes, domicile

6 Reasons to Keep the Massachusetts Estate Tax

Posted by Harry S. Margolis on August 27, 2021

alexander-mils-lCPhGxs7pww-unsplashBy Harry S. Margolis

The Boston Globe yesterday published an editorial (in which I'm cited) calling for reform of the Massachusetts estate tax, arguing that because we have the nation's lowest estate tax threshold of $1 million, shared only with the state of Oregon, we are out of step with the rest of the country and especially other states in New England. They also argue that with median housing prices reaching $811,000 in the Boston area, that even estates of middle-income residents are subject to the Massachusetts estate tax and that they should not be.

Reasons We Should Keep the Estate Tax

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Topics: estate taxes, Massachusetts estate tax

Should You Do Estate Tax Planning in Massachusetts?

Posted by Harry S. Margolis on June 13, 2021

By Harry S. Margolis


With the federal estate tax threshold now at $11.7 million, very few people need to do federal estate tax planning any more. (The threshold was at $1.5 million as recently as 2005.) President Biden has proposed ratcheting back this limit to $3.5 million, but together through "portability" married couples would still be able to shelter $7 million from estate taxation. (The threshold will automatically drop to about $6 million in 2026 even with no new legislation since the Trump-Ryan increase had a 10-year sunset.)

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Topics: estate taxes

Some Biden Tax Proposals I Can Support

Posted by Harry S. Margolis on March 9, 2021

By Harry S. Margolis


Last week, I wrote about the reasons I disagree with President Biden's proposal to eliminate the step-up in basis. Here I'll discuss some other tax proposals he has which I can support.

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Topics: income taxes, capital gains taxes, estate taxes

3 Reasons I Disagree with Biden on the Step-Up in Basis (But Support His Other Tax Proposals)

Posted by Harry S. Margolis on March 2, 2021

By Harry S. Margolis


As a candidate, President Joe Biden proposed getting rid of the "step-up" in basis. This is a provision that erases capital gains upon the death of the owner. Here's how it works:

What's a Step-Up in Basis?

Let's say you bought some stock for $20,000 and today it's worth $50,000. If you were to sell the shares for this amount, you would have to pay tax on capital gains of $30,000. The purchase price is the stock's "basis." The gain is the difference between the proceeds and the basis.

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Topics: capital gains taxes, estate taxes, step-up in basis

What Can Non-U.S. Citizen Spouse Do to Avoid MA Estate Tax?

Posted by Harry S. Margolis on December 29, 2020

By Harry S. Margolis


If you or your spouse (or both) are not U.S. citizens and you live in Massachusetts with a total combined estate of more than $1 million, your estate tax planning could get complicated. This is in large part because non-U.S. citizens are not eligible for the marital deduction which permits unlimited tax free gifts between spouses whether during life or at death.

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Topics: Massachusetts, estate taxes

What Should the Estate Tax Threshold Be?

Posted by Harry S. Margolis on December 24, 2020

By Harry S. Margolis


For those dying in 2021, the threshold for federal estate taxes is $11.7 million, $23.4 million for a married couple. Smaller estates, which means virtually all estates, pay nothing. Larger estates pay 40% of everything above the threshold. 

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Topics: estate taxes

Appeals Court Case Potentially Undermines Phannenstiehl Protections

Posted by Harry S. Margolis on August 7, 2020

By Harry S. Margolis


The case of Phannenstiehl v. Phannenstiehl (475 Mass. 105, 2016) established the rule that if your parents create a trust for your benefit and leave discretion over distributions in the hands of the trustee, the funds in that trust will not be considered part of the marital estate upon your divorce. (See our description of this case: In Pfannenstiehl Case, MA SJC Affirms Use of Asset Protection Trusts.) A recent Massachusetts Appeals Court decision appears to narrow this rule. 

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Topics: asset protection, divorce, estate taxes

SJC Rules on Effect of Out-of-State QTIP Election in Massachusetts

Posted by Harry S. Margolis on July 29, 2020

By Harry S. Margolis


Perhaps only of interest to estate planners, but of great interest to them, the Massachusetts Supreme Judicial Court has ruled in Shaffer v. Commissioner or Revenue (SJC-12812, July 10, 2020) that out-of-state QTIP trusts are includible in the Massachusetts estates of surviving spouses if the deceased spouse's estate filed a federal QTIP election for the estate. This is probably relevant mostly for larger estates and for older trusts, since given the current $11.58 million federal estate tax threshold, few estates today need to file a federal QTIP election.

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Topics: estate taxes

Should There Be a Tax on Just 2,000 Estates Each Year?

Posted by Harry S. Margolis on January 28, 2020

By Harry S. Margolis


With the current federal estate tax threshold set at $11.58 million (over $23 million for a married couple) in 2020, fewer than 2,000 estates are expected to pay any tax this year. That's out of more than 2.8 million deaths, or approximately 0.07% of all estates. (The threshold for Massachusetts estates is $1 million.)

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Topics: Estate Planning, estate taxes, tax law

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