Death and Taxes: MD Lower Estate Tax Law

MARYLAND’S LOWER ESTATE TAX LAW

If you die in Maryland in 2014 with assets, including incidents of ownership [1], your estate will pay 6% of all assets and incidents of ownership in excess of One Million Dollars.  Let’s assume your estate is as follows:

$  300,000       =   Fair Market Value of Home  $400,000 less mortgage of $100,000

500,000       =   Term Life Insurance

40,000       =   Automobiles

120,000       =   401K or Thrift Savings

75,000       =   Savings

$1,085,000

$85,000 x .06 = $5,100 Maryland Estate Tax

 

If you pass in 2015, the above example would result in no estate tax.  See below the implementation of the new law.

2015  –   $1,500,000

2016 –    $2,000,000

2017  –   $3,000,000

2018  –   $4,000,000

After 2018 – the federal estate tax exemption (currently $5,340,000 adjusted annually for inflation.

The State of Maryland passed a law that increases the estate tax exemption gradually over the next 5 years, at which time the exemption will be tied to the federal exemption amount.  The federal exemption is indexed for inflation and is expected to approach $5.9 million by 2019.

The estate tax exemption is the amount a Maryland resident may pass to beneficiaries at death without incurring an estate tax.  Accordingly, a Maryland resident who dies in 2019 is expected to be able to pay $5.9 million of assets without incurring a Maryland or federal estate tax.

The law is helpful to Maryland residents because it lessens the impact of or even eliminates a state level estate tax they may otherwise incur.  As a result, these residents may pass a larger portion of their wealth to their beneficiaries.

Fred Antenberg advises individuals for wills, estate planning, and estate administration in Howard County, Maryland, and surrounding Maryland counties.  Fred’s office is in Columbia, Maryland, where you may CONTACT him at 410-730-4404.

[1] Definition of ‘Incidents of Ownership” – Any interests or rights that an individual maintains in an asset, including property and insurance, that allow a person to change, modify, use or benefit from that asset.   This is important for determining estate taxes.  An individual can reduce the size of his or her estate by gifting assets to beneficiaries, but, to avoid estate tax on the gift, the original owner must not retain any incidents of ownership in the gifted assets.  See also Internal Revenue Service Code and Revenue Rulings.