Bethesda Estate Taxes Attorney 

When working on a will, it is also important to consider what will happen to your estate. While estate planning is partially about leaving the estate to a particular person, it is also important to consider that you will be leaving them with estate taxes as well. Proper estate planning can mitigate the impact of estate taxes and a Bethesda estate taxes attorney can help you navigate the estate planning process. Get in touch with a capable estates attorney who can help.

Taxes and Tax Returns

When somebody dies, there are three different taxes systems to be considered. The first is the inheritance tax. Maryland and Bethesda have a freestanding inheritance tax. Inheritance tax is collected at The Register of Wills at the county level, so for Bethesda that would be The Register of Wills of Montgomery County. The tax is a tax on the right to receive assets. There is no requirement tax return. The collection is based on a report that is filed throughout the administration process, but the tax is either 10% or 11.1111%, depending on the type of gift. 

When discussing tax returns, it is important to also consider the other two taxes, which are the income tax and the estate tax. Generally and currently, income taxes are paid after death. So, from January first to the day of the decedent’s death, a final income tax return is filed and taxes, if necessary, are paid. Moving forward from the date of death, all income is reported on a fiduciary income tax return or a Form 1041. The other tax is the estate tax. The Maryland estate tax is in process of catching up to the federal estate tax, which is currently $5,490,000 for the year 2017. 

Maryland is hypothesized to pull the exemption rate by the year 2019.  An estate tax is due nine months from the date of death, so the return is due nine months from the date of death. The return is a form that allows the Comptroller of Maryland to assess whether there are any estate taxes that are due. In Maryland, if the estate exceeds the filing exemption, a return must be filed 

Documents to Submit With Tax Returns

There are a number of supporting documents that are to accompany the estate tax return for the Comptroller of Maryland or for the United States Treasury, primarily all of the supporting documentation which reflects the market value of the assets of the estate as of the decedent’s date of death. Often, this includes appraisals, stock valuations, and bond valuations. 

In addition, basic information regarding the estate is included, such as a will or a trust if present, death certificate, and letter of administration, which reflects the personal representative’s authority to complete and file the estate tax returns. A person can request an automatic six-month extension to file the return, but it should be noted that someone cannot request an extension just to pay any taxes that are due. 

Important Things a Personal Representative Needs to Know

Each state and estate administration is unique to the decedent’s assets.  The returns required may differ from estate to estate. It can be helpful to consult an income tax advisor and a Bethesda estate taxes attorney to determine which returns are required, and the filing deadlines of the respective returns. 

One of the important things to remember is that tax returns are due. There is no automatic reminder that triggers the filing of the return, but because there is no one notifying an individual after death that they are required to file a return. That does not mean that interest and penalties are not accruing in the event that a return in past due. It is prudent to check with an accountant and, an estates and trust attorney to determine whether there are returns due and what is necessary to prepare those returns.  

Mitigate the Impact of Estate Taxes

There are quite a few estate tax planning techniques available to reduce an estates exposure to taxes. Many of the techniques involve either maximizing the use of one’s personal exemption or maximizing the use of what is known as the marital deduction, which is an ability to give an unlimited amount of assets to a spouse who is a U.S. citizen. Other techniques include minimizing someone’s estate prior to death or freezing assets at a lower cost basis during one’s so that any appreciation passes to beneficiaries free of estate tax or at a lower  

A lot of these techniques, however, do require planning during one’s lifetime. While there are a few techniques that are available post-mortem, there are few and far between compared to what can be done with proper estate planning during one’s life. 

Unfortunately, with a number of estates, individuals do not have the opportunity to complete their estate plan and the result is tax exposure that could have easily and otherwise been avoided if proper planning had occurred.

Value of a Lawyer

The process of estate planning can be difficult but a Bethesda estate taxes attorney can simplify it for you. When leaving your estate to someone, the last thing you want is for them to be saddled with exorbitant estate taxes. Speak with a lawyer who can help protect your assets.