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Estate planning is a personalized process impacted by each individual’s unique family and financial circumstances. Estate planning attorneys are often asked the following questions, and the answers are important to understand as you prepare your estate plan.

1. What Is the Difference Between a Will and a Trust?

A will is a document that directs the disposition of any assets you own individually after your death. It is subject to the probate process after your death, and the probate court appoints a Personal Representative (usually the person named in your will) to oversee the transfer of the assets controlled by your Will. A trust is a legal arrangement to transfer ownership of property to one person (the Trustee) to manage on behalf of another person (the beneficiary). A trust document is typically created to set forth the terms upon which the trust will be managed. A trust may be created during your lifetime (an inter vivos trust, sometimes called a living trust), or it may be created after your death (a testamentary trust).

The terms for a testamentary trust are often document in the trust maker’s will. For example, a will may direct the creation of a trust for the benefit of the deceased individual’s minor children. There are many different kinds of inter vivos and testamentary trusts, each of which are used to accomplish a variety of estate planning goals.

2. What Happens If I Die Without a Will in Maine?

Individuals who die without a will are said to have died “intestate.” Each state has laws which govern the administration of intestate estates. These laws express who will have priority to serve as the estate’s personal representative, who will be a beneficiary of the estate, and other rules and timelines related to estate administration. In Maine, the intestacy statutes are codified in Title 18-C, Article II, Part I of the Maine Revised Statutes. In general, the laws of intestacy direct assets to the relatives who are closest to the decedent in degrees of kinship (e.g.: spouse, children, parents, siblings, etc.).

senior couple meets with attorney to update their estate plan3. Will My Estate Need to Go Through Probate After My Death?

Your estate will need to be probated if its total value exceeds $40,000 and you have probate assets that need to be transferred upon your death. Probate assets are any assets that you own solely in your name and which do not have a beneficiary designation. Non-probate assets are any assets that will transfer to another person automatically upon the death of the owner.

Assets you own jointly with another person, assets that have a beneficiary designation, or assets that you have transferred to a trust prior to your death, are non-probate assets because the law provides that ownership of the assets will automatically transfer to the joint owner, the designated beneficiary, or according to the terms of the trust upon your death. If you hold any real estate as a probate asset, regardless of its value, your estate will need to be probated in order to distribute the real estate to your intended beneficiaries.

4. Will My Family Members Have to Pay Tax On Their Inheritance?

What is an inheritance tax? Is it the same as the estate tax? The short answer is no. An inheritance tax is a tax that beneficiaries would have to pay as part of receiving their share of the estate. An estate tax is a tax paid by the estate based on a number of factors, including: 1) the value of the estate; 2) where the decedent lived at the time of death; and 3) the type and location of the assets in the person’s estate. Inheritance and estate taxes are also separate from any income taxes an estate might incur over the course of its administration.

For deaths occurring in 2022, the first $12.06 million of an estate passes free from any federal estate tax. Some states impose their own estate tax, so depending on where you live at the time of your death, your estate may be subject to state estate tax even if it is not subject to federal estate tax. For 2022, the estate tax exemption (the amount that may pass free from estate tax) for Maine residents is $6.01 million. If your estate is taxable, the tax obligation belongs to your estate, not to your individual beneficiaries. Maine does not have an inheritance tax.

5. How Often Do I Need to Update My Estate Plan?elderly couple meets with attorney to update their estate plan

Your family and financial circumstances will change over time. Marriages, births, deaths, changes in employment (including retirement), and changes in the law are among the many events that may impact your estate plan as time passes. Whenever you have experienced a significant life event or entered into a new phase in your life, you should review y

our estate plan to determine whether your plan was impacted by the change. At a minimum, your plan should be reviewed every 5-10 years to be sure it still meets your needs and reflects your wishes.

6. What Happens If I Lose the Ability to Make Decisions About My Health or Finances?

If you are an adult and you become incapacitated, another responsible adult must make decisions about your healthcare and finances. Your decisions will be made by an agent of your choice if you have planned ahead, or by a guardian and/or conservator appointed by the probate court if you have not. Guardians and conservators are appointed only

after incapacity has occurred and you are no longer able to determine who should make decisions for you.

If you wish to plan ahead and select your own decision-makers, you can do so by creating a Durable Financial Power of Attorney – appointing an agent to make financial decisions on your behalf – and an Advance Health Care Directive – appointing an agent to make medical decisions on your behalf. These two documents are part of every complete estate plan and are recommended for every individual with capacity that has reached the age of 18 years.

While there are many forms for Advance Health Care Directives that are free of charge to the general public, a Durable Financial Power of Attorney should be drafted by an attorney to be sure it meets the specific requirements of the governing state.

The Conclusion

Your best choice is always to plan ahead. An incomplete estate plan can leave you and your family with difficult choices and expensive court decisions. To avoid these issues, it is best to speak with a qualified attorney to begin making these decisions as soon as you can. Working with a professional will ensure that all of your documents are thorough and address all of your individual needs.

If you have questions or would like to learn more, our attorneys would be pleased to meet with you to discuss your planning options.

Candace Augustine, Esq.
Candace Augustine, Esq.

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