Beginning January 1, 2011, the federal government exempted estates with values under $5 million from “death taxes,” but individual states have the option of following suit or requiring their own taxes on estates and inheritances. Certain states impose both; others impose one or the other. In Maine, your inheritance may or may not be taxable, depending on how much you inherited and what you do with the inheritance after you receive it.
An inheritance tax is different from an estate tax because the beneficiary pays it, not the estate. It's a tax only on a specific bequest, not on the entire estate. Maine doesn't have an inheritance tax. Therefore, any bequest you receive is tax free in this respect, but other taxes might apply.
Maine imposes an estate tax before the executor of a will transfers gifts and inheritances to beneficiaries. This may theoretically affect the amount you receive, even though you don’t owe the tax personally. As of 2011, estates with a value of $1 million or less were exempt from this tax. If the deceased’s estate is worth more than this, the estate taxes due decrease the overall cash available to the estate. This may reduce the percentage that the deceased bequeathed to you.
What you do with your inheritance after you receive it may result in income taxes being due when you file your personal return. For example, if you inherit $50,000 and put it in an investment account, and that account produces interest, then you have to claim the interest as income. If you inherit real estate, you most likely have to pay property taxes on it, depending on the tax laws and tax structure of the county or municipality where it's located. There might be rare exceptions.
In June 2011, the Maine legislature made changes to the state’s estate tax laws going forward. Beginning in 2013, estates valued at up to $2 million are exempt from paying estate taxes.
Even if the estate you’re inheriting from doesn't have to pay estate taxes, your inheritance might be delayed for a little while as the executor works out the tax situation. Maine places a tax lien against all the deceased’s property at the time of her death to prevent it from being distributed or sold before estate taxes are paid, if any are due. If the estate doesn’t owe estate taxes, the executor files Form 706ME with Maine Revenue Services and the lien is lifted. You then receive your inheritance.
- Maine Revenue Services; Do I Have to File a Maine Estate Tax Return?; September 2010
- Retirement Living Information Center; Taxes by State; January 2011
- Nolo; Estate Tax — 2011 Tax Law Has New Rules for 2010 Deaths; 2011
- McGuire Woods; 2011 State Death Tax Chart; July 2011
- Internal Revenue Service. "Estate Tax." Accessed Aug. 24, 2020.
- Tax Policy Center. "The State of State (and Local) Tax Policy." Accessed Aug. 24, 2020.
- Tax Policy Center. "Key Elements of the U.S. Tax System." Accessed Aug. 24, 2020.
- Internal Revenue Service. "Instructions for Form 706 (08/2019)." Accessed Aug. 24, 2020.
- General Statutes of Connecticut. "Chapter 217: Estate Tax, Sec. 12-391(g)(6)." Accessed Aug. 24, 2020.
- Washington State Department of Revenue. "Estate Tax Tables." Accessed Aug. 24, 2020.
- JRC Insurance Group. "States with an inheritance tax." Accessed Aug. 24, 2020.
- NJ.gov. "GENERAL INFORMATION: Inheritance and Estate Tax," Page 1. Accessed Aug. 24, 2020.
- Nebraska Revised Statutes. "Chapter 77-2004: Inheritance Tax; Rate; Transfer to Immediate Relatives; Exemption." Accessed Aug. 24, 2020.
- Pennsylvania Department of Revenue. "Inheritance Tax." Accessed Aug. 24, 2020.
Beverly Bird has been writing professionally for over 30 years. She is also a paralegal, specializing in areas of personal finance, bankruptcy and estate law. She writes as the tax expert for The Balance.