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Estate Planning Bethesda

Maryland’s Estate Tax Burden is Lessening

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How much can I pass to my heirs without having to pay state estate tax

Maryland has the dubious distinction of being one of only two states that charge both an estate tax and an inheritance tax (New Jersey is the other). A law went into effect last year, however, that will gradually increase the Maryland estate tax exclusion (or exemption) amount. That makes it a good time to review your estate plan.

The exclusion amount used to be set at $1 million, meaning that a Maryland resident could pass that amount of assets at death without incurring state estate tax liability. Pursuant to last year’s law, the exclusion amount for 2015 is $1.5 million. The amount will increase each year, and in 2019, be equal to the amount of the credit allowed against the federal estate tax and gift tax (which is projected to be $5,900,000 in 2019). This will continue to reduce the number of Maryland estates subject to state estate tax and allow residents to pass more of their wealth to their beneficiaries. It will also simplify one aspect of estate planning for Maryland residents once the state estate tax exclusion amount matches the federal amount.

Some estate plans utilized trusts as a way to avoid estate tax, often through a credit shelter or bypass trust. With the phasing in of Maryland’s higher exclusion amounts, it is a good time to revisit that strategy. More benefit might be derived from focusing on other objectives such as saving income taxes or avoiding probate litigation.

The estates, trusts and probate attorneys at Longman & Van Grack have extensive experience advising clients on devising their ideal future plans. In fact, Longman & Van Grack attorneys Robb Longman and Lona Feldman, who specialize in estate planning, each have a Master of Laws degree in Tax. You can schedule a consultation today by calling (301) 291-5027.

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