The Tax Cuts and Jobs Act increased the federal estate tax exemption to $11.2 million for persons dying and transfers after December 31, 2017. Maine advisors have been watching to see whether the State would conform its exemption to the federal exemption, as up through 2017 the Maine exemption and federal exemption had been in tandem. The Maine legislature enacted an emergency law effective September 12, 2018, to make certain conforming tax changes, primarily income tax changes. However, it did not change Maine’s estate tax exemption to equal the federal exemption. Instead, it kept it at the $5.6 million level with a proviso that the amount is to be indexed after 2018.
The official explanation published by Maine Revenue Services reads,
Maine exclusion amount. For estates of decedent’s dying on or after January 1, 2018, the Maine exclusion amount is $5,600,000. For tax years beginning after 2018, the Maine exclusion amount will be adjusted for inflation. 36 M.R.S. §§ 4102(5) and 4119; LD 1655, PL 2017, c. 474, Part G.
The indexing is based on the Chained Consumer Price Index (C-CPI-U), a new standard, not the familiar CPI. The law says,
For the purposes of this section, the “cost-of-living adjustment” is the Chained Consumer Price Index for the 12-month period ending June 30th of the preceding calendar year divided by the Chained Consumer Price Index for the 12-month period ending June 30, 2017.
For example, as of September 2018 C-CPI-U had increased 2.0 percent over the last 12 months. That’s a little less than the 2.3% increase in the traditional CPI measurement. Assuming this rate remains roughly the same in the future, the exemption for Maine would increase by 2% for 2019, or $112,000. That’s $5,712,000 rather than $11.2 million.
This creates the same situation we faced during the years of “decoupling” when the Maine exemption lagged the federal exemption. In some cases that meant drafting complex provisions into Mainers’ wills and trusts to use both the federal and state exemptions to best effect. You should review you own plan and communicate with us about it to be sure you have things in proper order.
If you have questions, please contact:
Darcie P.L. Beaudin email@example.com
Jill A. Checkoway firstname.lastname@example.org
Bryan M. Dench email@example.com
This article is not legal advice but should be considered as general guidance in the area of estate planning. Darcie P.L. Beaudin, Jill A. Checkoway, and Bryan M. Dench are Trust & Estate Planning attorneys; others at the firm handle business and other matters. You can contact us at 207.784.3200. Skelton Taintor & Abbott is a full service law firm providing legal services to individuals, companies, and municipalities throughout Maine. It has been in operation since its founding in 1853.