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Estate Planning Considerations for Retirees New to Maine

HM PaysonRetirement and moving are both huge life events, and planning for them can take months or even years. If you have recently retired and moved to Maine, congratulations! Now is an excellent time to review your estate plan to make sure your affairs are in order for this next stage of your life. If you are considering retirement and a move to our state, this note provides some helpful tips to consider as you move forward.

If you previously lived outside of Maine and already have estate planning documents, now is a good time to review them to make sure they still reflect your wishes and are suitable for a Maine resident. If you do not have estate planning documents, this is a perfect time to make that a priority. Here are the basic documents most people need:

• Will. This document disposes of your assets at your death and names a personal representative (executor) to administer your estate, which includes paying debts, filing estate and income tax returns, and distributing assets according to the terms of the will.

• Advance Health Care Directive (Or Living Will). This document lays out your wishes regarding your health care if you are unable to communicate them due to incapacity. This might include decisions regarding treatment, medications, surgery, and life support.

• Power of Attorney. In this document, you (the “principal”) authorize another person (the “agent”) to deal with your financial assets on your behalf. The power of attorney can be drafted to become effective immediately or effective once you become incapacitated and unable to manage your affairs. The agent’s authority to act under the power of attorney terminates when revoked by the principal or when the principal dies.

• Trust. Many people establish a revocable trust to manage their assets in the event of incapacity. Trusts are also useful in second marriages as a way to provide financial support for the surviving spouse, but also maintain control over assets so they pass according to the wishes of the first spouse (e.g., to children of the first marriage) when the second spouse passes away. Trusts can also be used to avoid probate if properly funded. However, since probate in Maine is a relatively simple process, probate avoidance is often not the driving factor in establishing a trust.

Beyond disposing of your assets at your death, wills and trusts may be needed for estate tax planning. The 2018 federal estate tax exemption is $11.2 million per person and $22.4 million per married couple with “portability.” Portability allows the surviving spouse to utilize any unused estate tax exemption from the estate of the first spouse. We expect Maine’s 2018 estate tax exemption to be approximately $5.6 million per person. And since Maine does not recognize portability, some estate tax planning may be necessary for couples whose combined estates exceed the Maine exemption amount.

While it is important to execute estate planning documents, it is also necessary to review beneficiary designations. Certain assets, such as life insurance and retirement accounts, do not pass by the terms of your will, but instead pass according to the beneficiary designation you selected. A crucial part of estate planning is examining these beneficiary designations to ensure that they dovetail with your overall plan, not undermine it.

Similar to beneficiary designations, it is important to review how your property is titled or owned. If you may be subject to Maine estate tax, your estate planning attorney may recommend equalizing the assets owned by each spouse to ensure you are able to fund trusts designed to avoid Maine estate tax. Assets held as joint tenants with right of survivorship cannot be used to fund these trusts since they do not pass according to the terms of your will or trust. Therefore, while it is essential to establish an estate plan through your will and trust, it is equally important to ensure your assets are titled correctly so your estate plan functions as you intended.

While estate planning may seem to be a daunting task, with proper guidance from your estate planning attorney you can truly enjoy retirement in Maine knowing your affairs are in order. As always, we are happy to discuss these matters directly with you to be helpful in your planning process.

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