Attorney
Maryland is one of only six states that levies an inheritance tax. (Maryland also imposes an estate tax, making it the only state to levy both.)
The good news is that close relatives are typically exempt from Maryland inheritance tax, and with proper planning, an experienced Maryland estate planning attorney may be able to help non-exempt residents avoid inheritance taxes.
Let’s begin by looking at the difference between estate taxes and inheritance taxes. While estate taxes are based on the size of a decedent’s estate, inheritance taxes are based on who receives an estate’s property and assets. If a beneficiary is subject to inheritance tax, the rate is 10 percent of the asset’s “clear value.” The term clear value means the asset’s market value less any expenses associated with the asset. Inheritance tax can be levied on all assets and property passed under a will, deed, joint ownership, trust, or intestacy succession. (Intestacy refers to a person passing away without a valid will. In such cases, assets are divided according to Maryland’s laws of intestacy.)
Exemptions to the Maryland Inheritance Tax.
Maryland may exempt the following from paying inheritance tax:
- The decedent’s spouse, children, grandchildren, siblings, and grandparents
- The decedent’s stepchildren, former stepchildren, or other lineal descendants (that is, blood relatives)
- The decedent’s stepparents or former stepparents
- The spouse of a decedent’s children, stepchildren, grandchildren, or other lineal descendants
- The surviving spouse of deceased children or lineal descendants, as long as the surviving spouse did not remarry
- Certain non-profit organizations
- A business, as long as its owners are themselves exempt
Also, if an inheritor would need to sell a business to pay Maryland inheritance tax, he or she may be given up to five years to pay installments on the tax.
It is important to note that a person cannot simply gift assets shortly before passing away in order to help an inheritor avoid inheritance tax. In fact, certain gifts made two years or less before a person passes away may result in the inheritor being subject to inheritance tax on the gifted asset.
If you want to help your beneficiaries avoid inheritance taxes, or you are concerned that an asset you have inherited may be subject to inheritance tax, call the Law Offices of Clifford M. Cohen at (202) 895-2799 to schedule a meeting. We can meet in-person at our office or virtually via Zoom and other platforms.