Sometimes even death isn't enough to make us exempt from paying taxes -- or at least from those who inherit our estate from paying them. Marylanders are among the Americans whose beneficiaries may find themselves with a particularly large tax burden in estate and inheritance taxes if they don't do some careful estate planning.
Federal estate taxes are assessed by the Internal Revenue Service (IRS) on estates of $5.49 million and above. In Maryland and 13 other states plus Washington, D.C., a state estate tax is also assessed for estates over a specified amount. In Maryland, that amount is $3 million.
Maryland also assesses an inheritance tax on beneficiaries other certain relatives (spouses, children and other lineal descendants). That tax is paid by the beneficiary rather than from the estate. The assessment of this tax is based on the beneficiary's relationship to the deceased and the value of the property left to him or her rather than the total value of the estate.
You can't necessarily prevent someone from having to pay this tax by giving them assets prior to death because under Maryland law, assets given "in contemplation of death" and/or within two years of someone's death can be taxed.
Inheritance taxes can be difficult to avoid for the non-exempt beneficiaries to whom you leave assets, you can minimize the amount of taxes (both state and federal) that will have to be paid by your estate. It should be noted that if you leave your estate to your spouse, as long as that spouse is a U.S. citizen, these taxes can be avoided.
An experienced Maryland estate planning attorney can work with you to minimize the amount of tax to which your estate will be subject. This can help you pass along more of your hard-earned assets to those you care about.
Source: Pantagraph, "These States Will Tax Your Assets After You're Dead," Christy Bieber, April 15, 2017