Protect Your Legacy: Reduce Massachusetts Estate Taxes and Preserve Family Wealth
For high-net-worth families in Massachusetts, strategic estate planning is essential. With the Massachusetts estate tax exemption capped at $2 million per person and no portability between spouses, most estate plans include a B Trust, also known as a Bypass Trust or Credit Shelter Trust. This trust ensures the first spouse's $2 million exemption is not wasted when they pass.
Once the B Trust is funded, families face an important decision: how to handle the rest of the estate. Should the assets pass into a revocable survivor's trust (A Trust), an irrevocable QTIP trust (C Trust), or be transferred outright? Thanks to federal portability, many families today are simplifying their plans and avoiding unnecessary trust complexity.
This article breaks down the role of the B Trust in Massachusetts estate planning and explores your best options for structuring the remaining estate assets.
Cape Cod, Massachusetts
What Is a B Trust in Massachusetts?
A B Trust (Bypass Trust or Credit Shelter Trust) is an irrevocable trust funded with up to $2 million—the current Massachusetts estate tax exemption—at the first spouse's death. Its key purposes are to:
- Preserve the deceased spouse's MA estate tax exemption (since MA doesn't allow portability)
- Avoid estate tax at the first death
- Remove those assets from the surviving spouse's taxable estate
- Provide income and limited access to principal for the surviving spouse
The B Trust must have its own EIN and file annual Form 1041 income tax returns.
How to Structure the Rest of Your Estate After Funding a B Trust in Massachusetts
Once the B Trust is funded, the remaining assets in the deceased spouse's estate must be addressed. Here are the three most common strategies used in Massachusetts estate planning:
Option 1: Use an A Trust (Survivor's Revocable Trust or Marital Trust)
In modern estate planning, the A Trust is often a revocable trust for the surviving spouse. However, in some documents, it may refer to an irrevocable marital trust structured to qualify for the marital deduction.
Survivor's Revocable Trust (modern A Trust):
- Surviving spouse retains full control
- Assets receive a step-up in basis at second death
- Qualifies for MA marital deduction, deferring estate tax
- Federal portability available if Form 706 is filed
Drawbacks:
- Fully includable in the survivor’s estate
- No creditor or remarriage protection
- If Form 706 is not filed, federal exemption is lost
Best for: Simpler estates (<$10M), first marriages, or families prioritizing flexibility and simplicity
Boston, Massachuetts
Option 2: Use a C Trust (QTIP Trust for Massachusetts)
The C Trust, or QTIP Trust, is a traditional structure used to defer Massachusetts estate taxes and preserve control.
Benefits:
- Defers MA estate tax until second death
- Allows decedent to control ultimate distribution
- Provides creditor and remarriage protection
- Step-up in basis at second death
Drawbacks:
- Requires separate trust, EIN, and tax filings (Form 1041)
- Survivor must receive all income for life
- Less flexible than A Trust
Best for: Estates over $10M, blended families, and those needing asset protection or control beyond the surviving spouse
Option 3: Outright Transfer to Surviving Spouse
This option skips trusts entirely for the remainder of the estate.
Pros:
- Simplest option
- Survivor has full control
- Marital deduction applies to avoid tax at first death
Cons:
- Survivor can change beneficiaries
- No creditor protection
- Entire estate taxed at second death if only one exemption remains
Best for: Modest estates or families not concerned with control or asset protection
Understanding the A Trust: Survivor's Trust vs. Marital Trust
In some estate plans, the A Trust refers to a revocable survivor's trust, giving the surviving spouse full control. In others, the A Trust is a more traditional Marital Trust, which is irrevocable and qualifies for the marital deduction but restricts access to principal and ultimate control.
| Strategy | Uses MA Exemption | Defers MA Tax | Survivor Control | Step-Up at 2nd Death | 1041 Fiduciary Tax Return Required? |
|---|---|---|---|---|---|
| B Trust Only | ✅ Yes | ❌ No | ❌ None | ❌ No | ✅ Yes |
| A Trust (Survivor’s) | ❌ No | ✅ Yes | ✅ Full | ✅ Yes | ❌ No |
| A Trust (Marital) | ❌ No | ✅ Yes | ❌ Limited | ✅ Yes | ✅ Yes |
| C Trust (QTIP) | ❌ No | ✅ Yes | ❌ Limited | ✅ Yes | ✅ Yes |
Let’s look at an example:
Jim and Trudy live in Amesbury, Massachusetts. Jim passed away in December 2024. The value of his assets/estate totaled $20m. Their attorney previously put together the ABC trust structure within their estate plan. Within nine months of Jim’s passing, his estate was distributed (with the help of his attorney) to the ABC trusts as follows:
The B Trust: $2m
The C Trust: $11.99m
The A Trust: $6.01m
This strategy helped Jim use both his federal and state exemptions and reduced the amount of assets that Trudy will need to include in her estate when she passes. The B trust would be entirely excluded from Trudy’s estate. The C trust is excluded from Trudy’s federal estate but included in her state estate. The A trust is included in both her federal and state estate.
Potential estate tax savings are $5.59m federal ($13.99m * 40% tax rate) and $320K state ($2m * 16% tax rate).
Final Thoughts on B Trust Estate Planning in Massachusetts
For married couples in Massachusetts, funding a B Trust at the first death is one of the most effective ways to reduce estate taxes and preserve family wealth. From there, the choice between an A Trust, C Trust, or outright distribution depends on your estate size, family dynamics, and planning goals.
Whether you're focused on minimizing taxes, protecting beneficiaries, or simplifying administration, reviewing your estate plan in light of these strategies is essential—especially in a state like Massachusetts with strict estate tax thresholds and no portability.
Our firm is a registered investment advisory firm. This means we are a fiduciary. We are not lawyers and cannot give legal advice, but we can point you in the right direction to get these needs identified and addressed.