Treatment of Out-of-State Real Estate for Massachusetts Estate Tax Purposes

Recently, the Massachusetts legislature clarified the treatment of out-of-state real estate owned by a Massachusetts resident.  In 2016, the court ruled in Dassori v. Comm’r of Revenue that the imposition of estate tax on out-of-state real estate was unconstitutional.  Since then, we had relied on such case to exclude the value of any out-of-state property from the estate tax return.  Despite this case and the understanding of many practitioners, the 2023 statute failed to acknowledge the unconstitutionality of the tax, and attempted to impose an estate tax on the out-of-state real estate using a prorated credit.  In September 2024, the estate tax statute (General Laws Chapter 65C § 2A) was amended to explicitly exclude non-Massachusetts real estate from exposure to Massachusetts estate tax.  This aligns the statute with the ruling in Dassori.