By Elizabeth A. Caruso, Esq. 

Halloween is about things that seem scarier than they are and a few things that are secretly scarier than they look. Estate tax planning is full of both. This month, we’re separating fact from fiction and calling out a few “tricks” that could cost your family real money if you fall for them.

Trick #1: “Only the ultra-wealthy need to worry about estate taxes.”
For federal purposes, that’s mostly true; today’s exemption is a generous $15 million. However, that is scheduled to change, and several states, including Massachusetts, impose their own estate or inheritance taxes at thresholds far lower than the federal number. The Massachusetts estate tax threshold is just $2 million. This means that if you pass away with more than $2 million, your estate owes a tax on every dollar over that $2 million mark. While this may seem like a lot of money, with the values of real estate in our area, combined with even modest retirement savings, a lot people get closer to this number than you may think. This calculation includes all of your assets, even life insurance. Don’t let this myth lull you into skipping the conversation altogether.

Trick #2: “A will avoids estate taxes.”
A will tells the probate court who gets what. It does nothing to reduce what’s owed before they get it. Trusts are the tools that can plan for tax issues. A will alone is just the map, not the moving truck.

Trick #3: “I can set up my plan once and forget it.”
Nothing rots faster than a stale estate plan. Tax laws change, exemption amounts shift, families grow, and assets move. A plan drafted a decade ago may be built for a tax landscape that no longer exists. Treat your estate plan like a house; it needs regular upkeep, not a one-time build.

Trick #4: “Life insurance isn’t part of my taxable estate.”
Many people assume life insurance proceeds pass to beneficiaries income-tax-free and estate-tax-free. The income tax part is usually right. The estate tax part depends entirely on who owns the policy. If you personally own your policy, the death benefit is includable in your taxable estate.

The Treat: A plan that actually works

The good news? Every one of these tricks has a fix. With the right combination of trusts, gifting strategy, and ownership structuring, most families can significantly reduce, or even eliminate, their exposure to estate taxes. The key is starting before a deadline forces your hand. If it’s been more than a couple of years since your estate plan was reviewed, consider this your friendly Halloween warning: don’t let outdated assumptions be the thing that comes back to haunt your family.

About the Author: Elizabeth A. Caruso, Esq. is an attorney at Legacy Legal Planning, LLC, in Norwell. She has been practicing estate planning, probate, and elder law on the South Shore for more than 15 years. If this article has sparked questions for you, please feel free to reach out via phone 781-971-5900 or email client@legacylegalplanning.com to schedule a time to discuss your unique situation.