Published November 2026 · Reviewed by Todd Rosenfield, Esq., Estate Planning Attorney

Key Points

  • Massachusetts taxes estates over $2 million, and unlike federal law, a surviving spouse cannot use the unused exemption of the spouse who died first.
  • Traditional planning only shelters the first spouse’s exemption if enough assets are in that spouse’s name when he or she dies, and no one knows which spouse will die first.
  • A Joint Exempt Step-Up Trust (JEST) is a joint revocable trust designed so the first spouse’s $2 million exemption can be fully used, no matter whose name the assets are in.
  • A JEST can also provide an income tax “step-up” in basis at the first spouse’s death, not only for that spouse’s own assets but potentially for the surviving spouse’s as well, which can reduce or eliminate capital gains tax when appreciated assets are later sold.

The Massachusetts estate tax problem for married couples

For most families, the federal estate tax is no longer a concern: the federal exemption is $15 million per person in 2026. Massachusetts is different. Our state taxes estates over $2 million, that threshold is not adjusted for inflation, and it is not portable between spouses.

That last point matters most for married couples. Under federal law, a surviving spouse can generally use a deceased spouse’s unused exemption. In Massachusetts, if the first spouse’s $2 million exemption isn’t used at his or her death, it’s simply lost. A couple whose home, savings, and investments add up to $3 or $4 million can end up with only one $2 million exemption, and a state estate tax bill that can reach well into six figures.

The traditional solution, and its weak spot

The usual fix is a credit shelter (or “bypass”) trust. At the first death, up to $2 million passes into a trust that can benefit the surviving spouse but isn’t taxed again at the survivor’s death. That uses both spouses’ exemptions.

The weak spot is funding. A credit shelter trust can only be funded with assets the first spouse owns at death. If most assets are in one spouse’s name, or held jointly, and the “less wealthy” spouse dies first, there may not be enough in that spouse’s name to use his or her full exemption. The traditional workaround is to retitle assets between spouses to balance them. That can be inconvenient, it isn’t always possible (retirement accounts can’t be retitled), and it has to be kept up as assets change.

How a JEST works

A JEST is a single joint revocable trust for both spouses, with one key addition: each spouse is given a power over the entire trust, not just his or her own share. Because of that power, when the first spouse dies, all of the trust’s assets, including those contributed by the surviving spouse, are treated as part of the first spouse’s estate for estate tax purposes.

From there, the trust divides using a formula:

  • Family Trust: an amount equal to the Massachusetts exemption (currently $2 million) goes into a trust that can continue to benefit the surviving spouse and children, and won’t be taxed again at the survivor’s death.
  • Marital Trust: the balance goes into a marital trust for the surviving spouse. It qualifies for the marital deduction, so no estate tax is due at the first death.

The result: the first spouse’s full $2 million exemption is used regardless of which spouse dies first or whose name the assets were in, without retitling everything between spouses.

A simple example

Paul and Linda have about $4 million in a joint trust: their home, investment accounts, and savings, most of which came from Paul. Linda dies first.

  • Without JEST planning, if Linda’s own share of the trust is small, little of her $2 million exemption gets used. When Paul later dies with roughly $4 million, only his $2 million exemption is available.
  • With a JEST, the full trust is counted in Linda’s estate, $2 million funds the Family Trust, and the rest goes into the Marital Trust for Paul. At Paul’s death, the Family Trust isn’t part of his estate, so his taxable estate is about $2 million, potentially eliminating the Massachusetts estate tax.

This is a simplified illustration. Actual results depend on asset values, growth, and the terms of each plan.

The second benefit: a step-up in basis at the first spouse’s death

When someone dies, assets included in his or her estate generally receive a new income tax “basis” equal to their value at death. Any appreciation before that date is never subject to capital gains tax. With most joint trusts, only the first spouse’s own share gets this step-up at the first death; the surviving spouse’s share keeps its original, often much lower, basis.

A JEST changes that. Because all of the trust’s assets are included in the first spouse’s estate, the surviving spouse’s contributions can also receive a step-up at the first death, rather than waiting until the second.

Example: Paul and Linda bought investments years ago for $500,000 that are now worth $1.5 million, and most were contributed by Paul. Without a JEST, if Linda dies first, Paul’s share keeps its old basis, and selling it later could mean capital gains tax on most of the $1 million of growth. With a JEST, the full trust is included in Linda’s estate, so those assets can receive a new basis equal to their value at her death. If the Family Trust later sells them at that value, there may be little or no capital gain to tax.

A planning note: a federal rule, Internal Revenue Code §1014(e), can limit the step-up for property that comes back to the person who contributed it, and the IRS has applied that rule in private rulings involving joint trusts. The step-up is therefore strongest for the surviving spouse’s assets that pass to the Family Trust for children or other beneficiaries, and it may be limited for assets that pass back to the surviving spouse. We design each plan with this in mind and explain the expected result for your situation.

Is a JEST right for you?

A JEST may be worth considering if:

  • you’re married and your combined assets exceed, or may grow beyond, $2 million
  • most of your assets are in one spouse’s name, or held jointly
  • you’d prefer one joint trust to separate trusts and retitling assets

Other factors matter too:

  • Trust between spouses: each spouse holds a power over the whole trust, so a JEST is best suited to couples in stable, long-term marriages.
  • Creditors: assets subject to a spouse’s power may be exposed to that spouse’s creditors.
  • Retirement accounts and life insurance are usually coordinated through beneficiary designations rather than held in the trust during life.
  • Reporting: a JEST can have federal gift tax reporting consequences at the first death, which we address in planning.

A JEST isn’t the right fit for every couple. For some families, separate trusts, disclaimer planning, or other approaches may work better. JEST planning is often paired with Beneficiary Deemed Owner Trust (BDOT) provisions, which help protect your children’s inheritances while reducing the income tax on them. Both are advanced techniques available in our Legacy Plan.

Frequently Asked Questions

What does JEST stand for?

Joint Exempt Step-Up Trust. It’s a joint revocable trust designed to use the first spouse’s estate tax exemption fully and to provide a step-up in basis at the first spouse’s death.

Can a JEST provide a step-up in basis at the first spouse’s death?

Yes. Because all of the trust’s assets are included in the first spouse’s estate, the surviving spouse’s assets can also receive a new basis at the first death, which can reduce or eliminate capital gains tax on appreciation when they are later sold. The benefit is strongest for assets that pass to the Family Trust for children or other beneficiaries, and may be limited for assets that pass back to the surviving spouse.

Can we still change our trust?

Yes. A JEST is revocable while both spouses are living, and you can make changes together. After the first death, the Family Trust and Marital Trust become irrevocable.

Does a JEST help with the federal estate tax?

With a million federal exemption per person in 2026, most Massachusetts couples’ concern is the state estate tax. The same structure can also support federal planning for larger estates.

Do we need a JEST if our assets are under million?

Usually not for estate tax purposes, although the step-up in basis can still be valuable for appreciated assets, and growth, life insurance, and retirement accounts can push estates over the threshold sooner than expected.

Talk With a Massachusetts Estate Planning Attorney

Every family’s situation is different. At Socius Law Firm, Attorney Todd Rosenfield can review your assets and goals and explain whether a JEST, or another approach, makes sense for you. Schedule a free consultation or call (508) 870-5759.

Sources: M.G.L. c. 65C, §2A (St. 2023, c. 50); Internal Revenue Code §§1014(e), 2041; One Big Beautiful Bill Act (P.L. 119-21); IRS Private Letter Rulings 200101021 and 200210051. This article is general information, not legal advice.