Estate planning in Maine involves planning how to manage and distribute your assets, including providing for loved ones with minimal tax consequences upon your death or incapacity.
Creating a will
A will expresses your intent on how you wish your property to be distributed on your passing, which can be revoked or modified during your lifetime. If you die intestate, or without a will, the state of Maine will appoint an administrator and distribute your assets according to the state’s succession law that may not be as you intended and could possibly lead to family disputes.
A will should include:
- Property distribution
- Provisions for children and possible guardian
- Executor for the estate
- Funeral arrangements
- Organ donations
Probate is a legal process that determines the validity of a will, provides for an executor to administer the estate, pays all debts and creditors with claims on the estate, determines tax obligations, and identifies and distributes all remaining assets to the heirs.
Probate may not be avoided completely in some cases even if a will is made, especially in large estates, but there are ways to dispose of assets during your lifetime and avoid probate.
- Living trusts—This is a tool to transfer assets and title into a trust and allows you to name yourself as trustee without relinquishing control of your assets, and names a successor trustee to manage the estate on your incapacity or death.
- Joint ownership—Joint ownership of property with a right of survivorship allows title to automatically pass to the surviving joint owner on your death. Joint bank accounts have the same result.
- Accounts with designated beneficiaries—Any property with a title may have designated beneficiaries such as bank accounts, real property, cars and retirement accounts.
Special purpose trusts
A Totten Trust is an informal trust with a bank, credit union or brokerage firm known as a transfer-on-death account with a named beneficiary. For gifts to young children, a Crumney Trust avoids gift taxes by transferring gifts to a trust to be held in trust until children are of age.
Small estate exemption
Maine has a small estate exemption from formal probate for estates valued at $20,000 or less where the estate may be distributed using the collection of personal property by affidavit. Other small estates may be administered by a simplified process.
Financial power of attorney
This is a legal document that delegates the handling of your affairs. Only a durable power of attorney takes effect immediately and continues in full force and effect if you become incapacitated. It is revocable at any time if you are mentally capable and on your death.
Also known as a health care directive, this document sets forth your wishes regarding end-of-life health measures.
A health care power of attorney can appoint someone to make health care decisions for you.
Additional planning considerations
Most individuals should have some of the above plans for distributing their estates but there are other considerations:
- Estate taxes—Only very large estates valued at $5.25 million for 2013 are subject to federal estate taxes. Maine imposes an estate tax on estates valued at more than $1,000,000.
- Life insurance—Life insurance can be inexpensive and provide a valuable financial cushion if your children, spouse or other dependents need support in the long term. If you have other sources of benefits like a pension, group life insurance or large IRA, it may be an unneeded expense.
- Business succession—Any business should have a prearranged method of distributing the business interests on your death or retirement to ensure its transfer. Corporations or family limited partnerships may enable the smooth transfer to children.
- Pets—Pets cannot be named as beneficiaries, but you can establish a pet trust for the care of your beloved pets by naming a caretaker who may receive payments or hold funds for the pet’s care.
Consult an estate planning attorney
State and federal estate law frequently change. Consulting a Maine estate planning attorney will ensure your assets are protected and that any tax consequences are minimized.