Avoid Paying Unnecessary Estate, Gift & Income Tax in Maine
Why pay the government more in taxes than you have to? Why let the government take half or more of your wealth from your family after you die? Our Maine estate planning attorneys can help you legally avoid many estate, gift and income tax in Maine.
Estate, Gift, and Income Tax Planning in Maine
The federal estate and gift tax laws have been amended several times in the last several years. Under the most recently amended law, estates worth less than $11.4 million are exempt from the estate tax for 2019. The gift tax exemption during life has also increased to $11.4 million per individual, although any gift over $15,000 needs to be reported to the IRS. These exemptions are permanent but will likely increase each year based on inflation.
Effective January 1, 2016, Maine estate tax laws began to follow the federal exemptions. As with the federal estate tax, the Maine estate tax includes both probate and non-probate assets. However, assets left to a spouse or charity are not subject to estate tax. Another consideration are capital gains taxes, which need to be paid on the profits earned from assets such as stocks or real estate.
For persons with assets potentially subject to estate tax, there are options for reducing and possibly eliminating both federal and Maine estate taxes. Strategies range from using charitable giving, life insurance, outright gifts, or gifts in trust. With proper planning, you can also reduce the amount of capital gains taxes that your estate will need to pay.
Should I gift away my assets to my children now so the state doesn’t get them?
This is a tough question, and one we hear often. Giving away your assets such as real estate may result in an unacceptable loss of control–which can have significant emotional and financial drawbacks. Once you are no longer the owner of your property, you have no ability to stop the sale of the property, its mortgage, its transfer to another person, its mismanagement, or even its destruction. You also no longer have the ability to sell or mortgage the property yourself, even if you find yourself in need of cash in the future.
If you transfer assets to your child and that child is sued, incurs debts, or gets divorced, he or she could lose the property. Gifting also has consequences if you foresee applying for MaineCare nursing home benefits. Upon application, MaineCare will look back five years to see if you transferred any assets. If you did, you will be ineligible for that value of benefits. If you contemplate needing MaineCare, we suggest meeting with Attorney Jackson before making gifts.
If you give any one person more than $15,000 a year, whether in cash, real estate, or stocks, you need to file a gift return with the IRS. You won’t pay any tax, but you have to report the gift, and any gift of real or personal property will require an appraisal. If you’re giving gifts as a couple, you can give $30,000 ($15,000 per person) to each recipient without needing to file a gift tax return. Attorney Jackson is always happy to discuss the benefits of gifting various assets and to file gift tax returns on your behalf.
Recipients of gifts are not taxed, but they do not benefit from the step-up in tax basis that heirs receive. If you give someone property as a gift, the recipient’s tax basis in the property is the same as yours – the price you paid for it plus any capital investments. If you leave property to someone in your will, the recipient’s tax basis is “stepped up” to the fair market value of the property at your date of death. This step-up in basis can result in significant capital tax gain savings when the property is sold.
Call a Maine Estate Planning Attorney to Schedule Free Consultation.
At Jackson & MacNichol, we understand that estate taxes, gift taxes and income taxes in Maine can be a complicated and confusing. That’s why we strive to focus on our individual clients’ needs, and are prepared to assist with every aspect of process. We are always just one phone call away. For a free consultation and benefits analysis, call us today at 207-360-8889.