Massachusetts Estate Planning in 2026: Four Key Updates Every Family Should Know

At Borchers Cusano Trust Law, we believe that estate planning should be understandable and accessible for everyone. Massachusetts has made some big changes to its estate tax laws in recent years, and these updates can have a major impact on your family’s financial future. Here are four important things to know for 2026:

Out-of-State Real Estate Is No Longer Taxed by Massachusetts

• What’s new? If you own property outside Massachusetts, such as a vacation home in Florida or a condo in New Hampshire, Massachusetts will no longer include that property when calculating your Massachusetts estate tax. This change is retroactive for deaths on or after January 1, 2023.
• Why does this matter? Before this change, out-of-state real estate could push your estate over the Massachusetts tax threshold, resulting in a big tax bill. Now, only Massachusetts property counts toward the estate tax. If your estate already paid tax on out-of-state property after January 1, 2023, you may be able to file for a refund.
• Legal background: This update follows the 2016 Dassori case, where the court ruled it was unconstitutional for Massachusetts to tax out-of-state real estate. The law now clearly excludes out-of-state real estate from the Massachusetts estate tax calculation.

The $2 Million Exemption and How Gifting Can Eliminate Estate Tax

• What’s new? Effective January 1, 2023, Massachusetts doubled its estate tax exemption to $2 million per person (or $4 million for a married couple with proper planning). If your estate is worth $2 million or less, there is no Massachusetts estate tax.
• But here’s the big opportunity: Massachusetts does not have a gift tax. This means you can give away assets during your lifetime to bring your estate below the $2 million threshold and completely avoid the Massachusetts estate tax. For example, you can make annual gifts up to $19,000 per person in 2026 (or $38,000 per couple) to as many people as you want, and larger gifts are also possible without triggering a state gift tax (though federal rules still apply).
• How does this work in practice? Suppose you have $2.5 million in assets. If you gift $600,000 to your children before you pass away, your estate drops to $1.9 million, which is below the threshold, and no Massachusetts estate tax is due. Under the old law, lifetime gifts were added back to the estate to determine whether a tax filing was necessary, which often resulted in a tax being due, but the new law eliminates this computation. Now, only the assets you own at death count toward the $2 million limit.

Joint Revocable Trusts: A New Favorite for Married Couples

• What’s new? In the past, married couples often created separate revocable trusts for each spouse. Now, many estate planners recommend a joint revocable trust when flexibility is important. It should be noted there is still a place for separate trusts depending on the facts and circumstances.
• Why the shift? With a joint trust, you can include 100% of an asset in the estate of the first spouse to die. This means the entire asset gets a “step-up” in cost basis to its current market value, which can save your family a lot in capital gains taxes if the asset is later sold. With separate trusts, only 50% of the asset typically gets this step-up.
• Example: If a couple owns a house together in a joint trust and one spouse passes away, the entire house can get a new, higher cost basis. If the house is later sold, there may be little or no capital gains tax. With separate trusts, only half the house would get this benefit.
• Legal background: This strategy is supported by federal law (IRC §1014) and recent IRS rulings. Massachusetts now follows the federal rules for basis step-up, so a joint trust can provide a full step-up in basis for assets included in the first spouse’s estate.

LLCs and Estate Tax: Massachusetts vs. New York

• What’s new? If you own Massachusetts real estate through a single-member LLC that is disregarded for income tax purposes, Massachusetts treats your LLC interest as “intangible property.” For non-Massachusetts residents, intangible property is not subject to Massachusetts estate tax. This means if you are a non-resident of the state, you can avoid Massachusetts estate tax on real estate by holding it in a disregarded LLC.
• Beware: Not all states follow this rule. For example, New York does not treat a disregarded LLC as intangible property for estate tax purposes. If you own New York real estate through a disregarded LLC and you are not a New York resident, New York will still tax the property in your estate.
• Why does this matter? If you are planning to move out of Massachusetts or own property in multiple states, it’s important to know how each state treats LLCs for estate tax purposes. The rules can be very different, and a strategy that works in Massachusetts may not work in New York or elsewhere.

What Should You Do Next?

These changes create new opportunities to save on taxes and simplify your estate plan. But every family’s situation is unique. If it has been more than 5 years since your last estate plan review, now is the time to contact us to take advantage of these new Massachusetts rules and assess exposure in any other states where you own property.