What Taxes Do I Pay When I die?
This is the biggest question on everyone’s mind when it comes to death and probate.
Without needless fluffing, here is the outright answer:
If you live in Massachusetts, you nor your kids (or beneficiaries) need to pay any taxes if your GROSS estate is worth UNDER $2,000,000.
If you live in Connecticut, you nor your kids (or beneficiaries) need to pay taxes if your GROSS estate is worth UNDER $12.9 million.
What is my “Gross Estate”?
Both Connecticut and Massachusetts define your “Gross Estate” using the same language as the federal government, that is: It (the gross estate) consists of an accounting of everything you own or have certain interests in at the date of death . The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. The total of all of these items is your “Gross Estate.”
In laymans terms please?
The gross estate is everything you own. So like the value of your house, plus the value of your bank accounts, plus the value of your securities, IRA, 401K, cars, diamond jewlery, tools in your tool shed, and even your life insurance policy.
So if you take evvvvvveerryything you own… and estimate a total price… that is your gross estate.
Keep in mind that although technically even things like the paperclips in your desk drawer and unused toilet paper you leave behind are part of your “gross” estate, no lawyer accounts for those types of inconsequential items. And the probate court is not nitpicky over that stuff either.
Example:
Susan owns:
- House – $900,000
- 401k – $400,000k
- Stocks – $800,000k
- Life insurance policy naming her kid as beneficiary – $250,000k
- Bank accounts – $150,000k
Susans Total Gross estate: $2,500,000
If Susan lived in Massachusetts, since you’re only taxed on a gross estate worth over $2,000,000… Susan would have to pay an estate tax.
If Susan lived in Connecticut, since you’re only taxed on a gross estate worth over $12,900,000… Susan wouldn’t have to pay any taxes. Her beneficiaries would get her stuff, tax free.
Keep in mind though, 401k’s are taxed separately, they always get taxed.
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