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Maryland residents should revisit their estate plans

Some states have inheritance taxes. Some have estate taxes. Some have neither. Only one has both - you guessed it: Maryland.

If you're just moving to Maryland, now is a good time to review state laws and how they apply to your estate plans.

Maryland's inheritance tax

Maryland's inheritance tax is levied on 10 percent of the market value of inherited property.

The law exempts property inherited by spouses, lineal descendants (including stepchildren), parents, grandparents and siblings, and some nonprofits.

The tax is also exempt if the inheritance is less than $1,000, is compensation for Holocaust-related losses, or if a registered domestic partner jointly owns the primary residence.

Lastly, the inheritance tax is exempt if the estate qualifies for simplified probate because all probate property is less than $30,000.

Maryland's estate tax

Maryland's estate tax (which goes up to 16 percent) is on estates that are worth $5 million or more. If the estate is worth less than $5 million, there is no estate tax.

This is separate from the federal estate tax. That tax is on estates of $10 million or more (indexed for inflation at $11.4 million in 2019).

Maryland also allows "portability" of unused estate tax exclusions for a surviving spouse. This means a surviving spouse can choose to claim unused portions of the predeceased's estate tax.

The "gross estate" for tax purposes includes:

  • Bank accounts
  • Vehicles
  • Investments
  • Real estate (or half the real estate if co-owned with a surviving spouse)
  • Retirement accounts
  • Life insurance payouts
  • Business interests

There are, however, many exemptions that can be applied after determining the gross estate. Check with a qualified lawyer or estate planner for more details.

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