Beth Ellis, Bluestone Bank

Beth Ellis, a vice president and trust officer at Bluestone Bank in southeastern Massachusetts, is paying close attention to possible changes in estate tax regulations at the state and federal level. In this exclusive interview, she describes the best way for family offices to minimize their estate taxes, how to start planning to move assets into a trust and what pitfalls to look out for within the process. 

What’s the best way for family offices to use trusts to help minimize estate taxes? 

Utilizing trusts in your estate plan is a smart choice, since trusts are tailored to the needs and goals of the individual. Trusts can serve multiple purposes — minimizing estate taxes, control over the assets during and after lifetime. Trusts give control over the method of distribution to beneficiaries and contain language for charitable giving, scholarship programs, protection of benefits for disabled individuals.

What steps do people need to start taking in advance?

Here are the basic steps:

• Seek advice from professionals such as bank trust departments, financial advisers, attorneys and accountants to discuss your estate planning needs, goals and options.*
• Understand there is a federal estate tax [the so-called death tax]. It is a tax on a deceased person’s estate. For 2023, the federal tax rate ranges from 18% to 40% for estates with assets above the exclusion limit of $12.92 million. The federal exemption is portable between spouses. If proper tax planning is done, a married couple can protect up to $25.84 million upon the death of both spouses. If you have no federal estate tax, you may still be subject to state estate tax.
• Determine the value of your estates. This includes IRAs, life insurance, bank accounts, investment accounts, annuities and real estate to see if you have to be concerned about estate taxes.
• Determine if your state has an estate tax. There are a number of states that do not have an estate tax — such as New Hampshire, New Jersey and Florida, just to name a few.
• Determine the amount of the estate tax threshold or exclusion for the state you live in. For Massachusetts, the current exclusion amount is $1 million per individual. This means  if an individual dies with over $1 million in his or her estate, a tax return must be filed, and the tax applies to the entire estate, not just those assets over the exemption. With proper tax planning, a married couple can protect up to $2 million upon the death of both spouses.

What types of family offices are best poised to do this?

Whether you use a bank trust department, trust company or family office [single, multiclient or multigenerational], they are all suited to assist with utilizing trusts for tax planning purposes. Which financial institution to utilize should be determined on an individual basis, taking into consideration the family’s wealth, the sophisticated issues that come with having such wealth, along with the family dynamics and the needs of the client. An individual needs to consider what services the institution provides [bill payment, investment management, health and wellness, charitable giving, tax and estate planning], how many years of experience the institution has, the stability of the institution and whether they have areas of expertise that will meet the needs of the individual and their family. 

What are the biggest challenges people face when setting up trusts?

Challenges vary according to every individual’s goals, needs, comfort level and family dynamics. For example, it may be hard to get started, since an individual may find it difficult to discuss their demise. 

Some individuals are worried about the expense. We try to have them focus on the savings and meeting their goals and not the expense of the plan. You either pay now or pay later.

It may be hard to make a decision on who should be named as trustee, successor trustee, personal representative of the estate, when there are complex family dynamics such as a second marriage or individuals that do not get along.

In addition, not having full control over an asset can present a real challenge.

Are there new tax codes and regulations related to trusts and estate taxes that we should be aware of?

Rules, regulations and laws change constantly, and you should have your estate plan reviewed at least every five years or sooner, should there be changes in your circumstances.

For Massachusetts, there are currently two bills in the state Legislature to increase the estate tax exemption to $2 million or $3 million.

If there is no new tax legislation by Jan. 1, 2026, the current federal lifetime exemption will be reduced by about 50%, adjusted for inflation.

* This is not intended to be legal or tax advice. You should always seek the advice of your certified public accountant and estate attorney.