Estate Tax Planning

Estate Tax Exemption Amounts

1. Rhode Island: If a person’s taxable estate totals less than $1,733,264* there is no estate tax to be paid. If the taxable estate exceeds $1,733,264, the estate tax is assessed on all assets of the decedent above the $1,733,264 exemption amount.
2. In Massachusetts, once the person’s taxable estate exceeds the exemption amount of $1,000,000, the estate tax is also then assessed on all assets of the decedent, and the $1,000,000 exemption amount is lost.
3. Federal: Under the current estate tax law for 2023, a deceased person’s taxable estate having a total value of not more than $12,920,000 will not be subject to federal estate taxes. Should a deceased person’s taxable estate exceed $12,920,000, the estate tax will only be calculated based upon the excess sum over $12,920,000. The exemption remains applicable.

At the present time, $12,920,000 is the estate tax exemption for 2023, with modest increases through 2025. The estate tax exemption amount is slated to expire on Dec. 31, 2025. At this time, it is unclear whether the Biden Administration will extend or change that exemption amount. Given our current national budgetary issues, it does not appear likely that the exemption amount would be increased at that time.

* The Rhode Island estate tax exemption amount was raised to $1,733,264 effective for those persons dying after Jan. 1, 2023, which amount is subject to increase each year to allow for inflation.

Estate Tax Planning Techniques

The above-noted exemption amounts are available to each resident of Rhode Island and/or Massachusetts and each United States citizen. A married couple with the proper estate plan, can effectively transfer double the exemption amounts to their beneficiaries. Therefore, in 2023, married persons are able to transfer $25,840,000 free of federal estate taxes if they properly plan their estates and preserve the first-to-die spouse’s unused federal estate exemption amount. Under the present federal estate tax structure, if one spouse passes away without having fully utilized their estate tax exemption amount, then, with planning, the surviving spouse can utilize that predeceased spouse’s unused exemption amount along with his or her own estate tax exemption amount.

As an example, if a married couple has assets valued at $25,840,000 and, upon the first spouse’s death, only $3,000,000 of the estate tax exemption amount was used, then the surviving spouse can use the predeceased spouse’s unused exemption amount of $9,920,000, plus his or her own $12,920,000 exemption amount to transfer $22,840,000 at the death of the second-to-die spouse. The total amount available to be transferred free of federal estate taxes for a married couple totals $25,840,000.

With a proper estate plan, married persons who are Rhode Island residents are able to transfer $3,466,528 free of estate tax and Massachusetts residents are able to transfer $2,000,000.

At Mignanelli & Associates, Ltd., our attorneys utilize traditional estate tax planning trusts, along with a variety of other estate tax planning techniques to assist individuals in developing an estate plan to help reduce or, in some cases, eliminate estate taxes.