Written by: David Bryant, CPA & Michael Cooper, CPA
Estate planning has always been about looking ahead, but the landscape has shifted again. With the federal One Big Beautiful Bill Act (OBBBA) signed into law in 2025 and Massachusetts updating its own estate tax rules in 2023–2024, the rules for passing on wealth look very different from what they did just a few years ago.
For high-net-worth individuals and families, particularly those with estates ranging from $10 million to $20 million, these changes present new opportunities, but also raise new challenges. In Massachusetts, where the state exemption is far lower than the federal one, proactive planning is critical.
Key Takeaways
- The federal estate tax exemption will permanently increase to $15 million per person ($30 million for married couples) beginning in 2026.
- Massachusetts’ exemption remains much lower at $2 million per person ($4 million for couples).
- For many families, income tax efficiency, particularly strategies around the step-up in basis, now matters more than federal estate tax exposure.
- Estate plans should be reviewed regularly (every 1–2 years or after major life events) to reflect both federal and state realities.
What the Federal Exemption Increase Means
Starting in 2026, individuals will be able to pass on up to $15 million (or $30 million for married couples) without federal estate or gift tax. This permanently removes the “sunset” provision of the 2017 tax law, which would have cut exemptions in half.
Because so few estates will now be subject to federal estate tax, the focus has shifted to income tax planning. A central tool is the step-up in basis, which allows heirs to inherit assets at their current market value. This often means little to no capital gains tax if the heirs later sell those assets.
The higher exemption also creates opportunities for lifetime gifting. Families can transfer appreciating assets out of their estates while avoiding gift taxes, ensuring that future growth takes place outside the taxable estate. The federal top tax rate, however, remains at 40% on amounts above the exemption.
Why Massachusetts Residents Still Need to Plan
Massachusetts’s estate tax exemption increased from $1 million to $2 million in 2023, with a credit that eliminates tax below that amount and softens the blow just above it. But compared to the federal limit, Massachusetts still stands out as one of the most restrictive states.
A married couple can now leave $30 million tax-free federally, but only $4 million before Massachusetts estate taxes apply. For estates valued between $10 million and $20 million, that gap can mean millions of dollars in state taxes without proper planning.
It’s also important to note that real estate and tangible personal property located outside Massachusetts are generally not subject to the state’s estate tax, which can offer planning opportunities for families with multistate assets.
Real-World Examples
Example 1: A $10M Massachusetts Estate
Imagine a married couple with a $10 million estate. They might assume they’re safely under the new federal exemption and won’t owe estate taxes. However, in Massachusetts, roughly $6 million of their estate would still be subject to taxation. That could translate into a state estate tax bill of around $700,000 or more—a surprise no family wants.
Example 2: Gifting Land Early
Timing also matters. Suppose an investor buys land for $1 million and gifts 25% of it to heirs at that value. Only $250,000 of their lifetime exemption is used. If that land later appreciates to $25 million, the growth on the gifted portion happens outside their estate, saving millions in estate taxes. This strategy is especially powerful in real estate, where appreciation can be dramatic.
Smart Planning Strategies for Massachusetts Families
- Review and update your plan: Old wills and trusts often contain formulas tied to outdated federal exemptions. Left unchanged, they can create unintended results.
- Prioritize income tax efficiency: Holding highly appreciated assets until death can secure the step-up in basis and minimize future capital gains taxes for heirs.
- Gift strategically: Use the expanded federal exemption to transfer appreciating assets out of your estate, especially real estate, partnership interests, or early-stage investments.
- Plan for Massachusetts estate taxes: Techniques like irrevocable trusts, spousal lifetime access trusts (SLATs), and gifting programs (outside the three-year look-back) can reduce state exposure while preserving some family access.
- Review regularly: Estate planning isn’t “set it and forget it.” Revisit your plan every 1–2 years or when life changes—births, marriages, divorces, business sales, or major acquisitions—shift your circumstances.
Why Timing Still Matters
While the federal exemption is now permanent, delaying planning has costs. The longer assets appreciate inside your estate, the larger your taxable base becomes. Early planning not only locks in today’s value but also allows growth to occur outside your estate.
Final Thoughts
The OBBBA provides certainty at the federal level, but Massachusetts families must still navigate a very different reality. With a $2 million state exemption compared to a $15 million federal one, proactive estate planning remains essential.
By combining tax-smart strategies with careful timing and regular reviews, families can reduce both state and federal taxes, preserve flexibility, and make sure their wealth transfers to the next generation as intended.
FAQs
Q: What is the federal estate tax exemption starting in 2026?
A: $15 million per person, indexed for inflation. Married couples can combine exemptions for $30 million.
Q: Does Massachusetts follow the federal exemption?
A: No. Massachusetts has its own $2 million exemption, which is much lower than the federal limit.
Q: If my estate is under $30 million, am I safe from taxes?
A: Not necessarily. In Massachusetts, estates above $2 million are still taxable—even if they’re under the federal limit.
Q: How can I reduce Massachusetts estate taxes?
A: Tools like irrevocable trusts, spousal lifetime access trusts (SLATs), and well-timed gifting can help minimize state estate tax exposure.
Q: How often should I update my estate plan?
A: Every 1–2 years, or after major life changes like a business sale, inheritance, birth of a child, or divorce.