Legal Blog

The Weekly Scenario: Maryland Estate Tax Changes

Question:

What changes did the new legislation make to the Maryland estate tax under the new law that passed the other week?

Answer: 

Just to take you back, before the new law went into effect, a Maryland taxable estate that exceeded $1,000,000 would have owed Maryland estate tax.  There was no portability and each spouse was limited to the spouse’s own exemption amount upon his or her death (and if not used in the first spouse to die’s estate, it was lost). Under Maryland’s new law, the applicable exclusion amount is set to increase gradually over the next five years as follows:

 Decedent dying on or after:  Applicable exclusion amount:
 January 1, 2014 and before January 1, 2015  $1,000,000
 January 1, 2015 and before January 1, 2016  $1,500,000
 January 1, 2016 and before January 1, 2017  $2,000,000
 January 1, 2017 and before January 1, 2018  $3,000,000
 January 1, 2018 and before January 1, 2019  $4,000,000

For the estate of a decedent who dies on or after January 1, 2019, the applicable exclusion amount will equal the federal applicable exclusion amount. The federal applicable exclusion amount is indexed for inflation (currently $5,340,000). The inflation-indexed applicable exclusion amount in 2019 is estimated to be $5,900,000 (not including the deceased spousal unused exclusion amount). Beginning in 2019, the Maryland estate tax exemption will be portable between spouses. If any Maryland estate tax exemption is unused at the death of the first spouse to die (as, for example, where the first spouse to die has insufficient assets to take full advantage of his or her exemption), then at the death of the surviving spouse, he or she may use the deceased spouse’s unused exemption. With portability, beginning in 2019, a married couple will have an estimated combined Maryland estate tax exemption of $11,800,000. Comment:  With this recent law change, most people who die a Maryland resident will not have any federal or Maryland estate tax exposure. As always, if you have questions or would like to know more about estate planning please contact Steven E. Shane at: Steve Shane Head Shot for websshane@offitkurman.com | 301.575.0313. Steve provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates. You can also connect with Offit Kurman via FacebookTwitterGoogle+YouTube, and LinkedIn.