Maine requires all estates to file a Maine estate tax return, but for deaths in 2013, taxes only estates of more than $2 million. In 2012, the exemption amount was $1 million.
Estates of up to $5.25 million are currently exempt from federal estate tax. So under the law in effect for deaths in 2013, if you leave assets worth more than $2 million but less than $5.25 million, your estate won’t owe federal tax but might still owe Maine estate tax. The Maine estate tax rate, however, is much lower than the federal estate tax rate; the maximum rate is 16% for deaths in 2012 and 12% in 2013.
Filing the Maine Estate Tax Return
The personal representative of the estate is required to file a Maine estate tax return, even if no tax will be due. The state’s estate tax is assessed on the estates of Maine residents, and also on assets that nonresidents owned in Maine, including real estate or other tangible items in the state.
Estates are divided into two groups, based on value:
Gross value of more than $2 million. These estates file a regular Maine estate tax return (Form 706ME). If deductions reduce the amount of the taxable estate to below $1 million, the estate won’t owe tax. A tax return must be filed, however.
Gross value of up to $2 million. Even though no tax will be due, these estates must file an estate tax return—a shorter “EZ” version of the regular Maine estate tax return. It must be filed to remove an automatic tax lien (legal claim) on all Maine property in the estate, including real estate and other items physically located in the state. Assets can’t be transferred to the people who inherit them until the lien is removed, showing that the government doesn’t have a claim against the asset for unpaid taxes.
Even if the estate is not large enough file a federal estate tax return, the personal representative must still prepare and file one with the Maine return.
Will Your Estate Owe Maine Estate Tax?
Your estate won’t owe Maine estate tax if you leave everything to your spouse; property left to the surviving spouse is exempt from state (and federal) estate tax, no matter what the amount. And it won’t owe tax if the value of the taxable estate, which is the gross estate minus deductions, is smaller than $2 million.
The gross estate includes just about everything you own at the time of your death:
- Bank accounts, certificates of deposit
- Investment accounts, stocks and bonds
- Real estate
- Life insurance proceeds from policies on your life, unless you didn’t own the policy
- Retirement account funds
- Business interests (a sole proprietorship, limited liability company, or small corporation)
- Assets held in a revocable living trust or other trusts you controlled
Paying the Tax
The Maine estate return is due nine months after the death, but estates get an automatic six-month extension. Any tax owed is due nine months after the death, regardless of when the return must be filed. The estate can pay the estimated tax and then pay any unpaid amount (plus interest) when the return is filed.
Maine estate tax returns and information are available from Maine Revenue Services. The personal representative will need to hire an experienced lawyer for advice and for preparation of the return.