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Updated: April 16, 2025 How to

Death and taxes: Estate planning basics for business owners

By Nicholas Tomso, Rune Law LLC

Many families, individuals and business owners are concerned about what might happen to their wealth upon their passing.

One of the most common concerns is fear surrounding estate tax. As a business owner, when you pass away, the assets you pass along to your loved ones could be taxed at up to 52% when combining both federal and Maine estate tax. 

Nicholas Tomso of Rune Law LLC
Photo / Provided
Nicholas Tomso of Rune Law LLC

The reality is that most estates will never be subject to this tax. In 2025 the federal estate tax limit is $14 million, and the Maine estate tax limit is $7 million. This means that your estate is only subject to the tax on the wealth you pass that exceeds these values. For most individuals, as the numbers stand now, their estates will not be required to pay any estate tax. For some business owners, however, the likelihood increases.

Here are three tips for what to do.

Educate yourself about the tax

The numbers, specifically the federal limit, is anticipating change this year. In 2017, the first Trump administration put into place these extraordinary high limits under the Tax Cuts and Jobs Act, which scaled up as time went by. When those numbers went into place, included with them was an automatic “sunset” of these numbers, which goes into effect starting Jan. 1, 2026.

This makes 2025 the last year we will experience such high estate tax limits, unless Congress decides to act and put law into place which overrides the sunset. The major concern for residents of states like Maine with state-level estate tax is that if the federal number drops, what can we expect the state number to do?

Only a few states have an estate tax. Among them are most of the New England states (Maine, Vermont, Massachusetts, Connecticut, Rhode Island) as well as New York.

While Maine has a fairly high limit, Massachusetts carries only a $2 million limit (which prior to 2022 was only $1 million), and Rhode Island carries only a $1.7 million limit. While still in the millions, many more residents of Maine could expect their estate to be subject to estate tax, should Maine decide to drop the estate tax limit down to levels comparable to these other New England states.

Know the value of your business

When trying to calculate the value of your estate, remember to include all assets which may be counted in your “taxable estate." Anything you have ownership, rights, or are entitled to at the time of your death, will be included in your taxable estate. This includes the value of your business and the assets held by said business. The assets which are often contributing the highest amounts to your estate tax total are first, a business, second, real estate, and third, retirement or investment funds. 

With business owners specifically, the main strategies for mitigating this tax revolve around how best to value that business. There are legal strategies available which can reduce the taxable value of a business when calculating estate tax, which can be very helpful when your estate is close to, or exceeds these limits. Often times, businesses are part of a legacy plan and include future generations stepping up to inherit the asset. Sometimes this type of planning can conflict directly with estate tax planning, which means weighing your options is deeply important.

Don’t go it alone — work with experienced professionals

These problems are not without solutions and these limits are especially important when trying to plan your legacy. The good news is that with proper estate planning, this tax can be mitigated, or in some cases, eliminated entirely.

If you believe your estate is subject to, or even remotely close to these limits, then you should have a serious conversation with estate planning professionals including accountants, attorneys and financial planners.

About the author

Nicholas Tomso, owner of Rune Law LLC in Gardiner, is an attorney licensed in Maine with a focus on estate planning, elder law, trust administration and Medicaid planning. He can be reached at nick@runelaw.com. 

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