Credit Shelter Trusts For Massachusetts Residents
Dale Tamburro • March 7, 2025

Credit Shelter Trusts for Massachusetts Residence

 

Credit shelter trusts are a way to take full advantage of Massachusetts estate tax exemptions. Being a Massachusetts resident we have been very lucky in terms of the appreciation of our real estate and many of my clients don’t realize that they are “millionaires” just by starting to look at their “worth” from their real estate. Massachusetts Estate Tax Laws have two major differences from the Federal Estate Tax Laws.


  • An Individual who passes away has a $2.0M Exemption before their estate/beneficiaries will owe an estate taxes. The FEDERAL lifetime gift/estate tax exemption is $13.99 million in 2025. The lifetime gift/estate tax exemption is projected to be $7 million in 2026.


  • Massachusetts does not allow for “portability”. The Federal law does. Portability means that spouses may share in their individual exemption, essentially doubling it. So presently a married couple could exempt up to $28M if one of them died in 2025. To have portability requires that the surviving spouse, elects it by filing a Federal Estate Tax Return for the deceased spouse even though no tax may be due).


In Massachusetts the best way to replicate the benefit of portability is the use by both spouses of separate credit shelter trusts. The way to preserve both spouses' exemptions (so potentially $4.0M vs $2.0M) has been to create a "credit shelter trust" (also called an A/B or bypass trust). Simplistically if a couple is worth $3.0M or $4.0M when the first spouse dies and after the surviving spouse is worth $3.0M or $4.0M then when the second spouse dies (assuming the same net worth) the estate tax would be $99,600 for $3.0M and $182,500 for $4.0M. By using these credit shelter trusts, which are unique to married couples, they will use $4.0M in exemptions instead of only having the benefit of $2.0M when the second spouse passes.


Standard estate tax planning is to split an estate that is over the prevailing state or federal exemption amount between spouses and for each spouse to execute a trust to "shelter" the first exemption amount in the estate of the first spouse to pass away. While the terms of such trusts vary, they generally provide that the trust income will be paid to the surviving spouse and the trust principal will be available at the discretion of the trustee if needed by the surviving spouse. Since the surviving spouse does not control distributions of principal, the trust funds will not be included in her estate at their death and will not be subject to tax. This way, in Massachusetts the couple can protect up to $4 million from estate taxation while still making the entire estate available to the surviving spouse if needed.

 

The rising federal estate tax exemption means that many older trusts drawn up for married couples contain outdated estate-splitting provisions that may cost them dearly in state or federal taxes, or both. As recently as 2020, if you have retirement funds landing in a trust after your death, it is almost a guarantee the language in your trust will not be up to date unless it was amendment after January 1, 2020. Couples would do well to have their revocable trusts that contain credit shelter provisions reviewed by a competent professional.


If you're interested in learning more about CST, contact our office today!

National Elder Law Month - May

By Dale Tamburro • May 2, 2025
1577 Spring Hill Road, Suite 310, Vienna, VA 22182 | 703-942-5711 | naela@naela.org | www.NAELA.org National Elder Law Month – May May is National Elder Law Month, a time designated by the National Academy of Elder Law Attorneys (NAELA) which I have been a member for over 25 years, to raise awareness about the legal, health, social, and financial issues faced by older adults and the resources available to support them. As a member of NAELA — the leading professional association dedicated to improving the quality of legal services provided to older adults and individuals with disabilities — I recognize the valuable public service that Law Office of Dale J. Tamburro provides to the residents of towns and cities that I provide seminar and workshops at. In light of our shared commitment to community support, I would like to invite you my seminars in May and June. These events are designed to educate the public on various topics related to elder law. In May we are focusing on Aging in Place, what to consider if you choose to stay home and alternatively if you decide to downsize what are the most important issues to be concerned with. National Elder Law Month is the perfect time for us to work together in raising awareness about these important issues and ensuring that older Americans, their families, and caregivers have access to the information they need. I would love the opportunity to discuss how we can partner on this initiative. Please let me know if you are interested or if you would like more details. I look forward to the possibility of working together to serve our community. Sincerely,  Dale J. Tamburro

Estate Planning for a Vacation Home

By Dale Tamburro • April 30, 2025
Owning a vacation home is a special privilege—but deciding what happens to it after you’re gone takes careful planning. Many parents hope to keep the home in the family, but doing so can be more complicated than expected. While meant to be fun and relaxing places to get away from everyday life, vacation houses can cause problems between siblings after their parents pass away. Some siblings may want to use the house, while others may need cash and want to sell. Disagreements can also arise over maintenance costs, taxes, and scheduling use of the home. One common option is to leave the property to your children in your will. However, if they inherit it equally as joint tenants or tenants in common and one sibling wants out, that sibling can force a sale if the others can’t afford to buy them out. Before deciding to pass the home on directly, consider holding a family meeting. Ask your children if they all want to keep the property and discuss logistics such as upkeep, taxes, and scheduling. Putting a written agreement in place, including a buyout plan, can help avoid future disputes. The buyout amount could be less than market value, and payments can be made over time; it's really completely up to the family. Other Options : Instead of giving the home outright, you could place it in a trust or a Limited Liability Company (LLC). LLCs are increasingly being used for vacations homes. Using an LLC allows parents to transfer interest in the LLC to their children while still retaining control. Parents can use the annual gift tax exclusion to slowly gift their children additional interest in the LLC each year. The LLC agreement can designate a property manager, provide instructions on maintenance costs and property taxes, and include buyout options. Property in an LLC is also protected from creditors.  Another option is a Qualified Personal Residence Trust (QPRT), which allows parents to live in the home for a set number of years, after which ownership transfers to the children. QPRTs can offer significant tax savings, but they are complex and must be set up carefully to be effective.