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Maryland Probate Cases: Estate Tax Returns

Maryland is one of the few states that has a state estate tax as well as an inheritance tax. Maryland residents may be subject to both the Maryland estate tax and the federal estate tax. The Maryland estate tax filing threshold is slated to match the federal filing threshold by the year 2019. This tax is both administered and collected by the Maryland Comptroller. Speak to a Maryland probate lawyer to learn more about how the Maryland estate tax may impact how your assets are divided upon death.

Estate Tax Filing Threshold

For decedents dying in 2016, the Maryland estate tax filing threshold is $2 million. It will continue to increase until it reaches the federal filing threshold for decedents dying in the year 2019. The federal estate tax filing threshold for decedent’s dying in 2016 is $5,450,000, which is indexed for inflation. During the gap period until the Maryland estate tax exemption reaches the federal exemption, Maryland does not recognize the concept of spousal portability.

The Maryland estate tax return is due nine months from the date of a decedent’s death. Though you can request or apply for a six-month extension to file the return, you cannot apply for any extension to pay the taxes that may be due.

Common Misconceptions in Maryland

What is commonly misunderstood about the Maryland estate tax return and its applicability is that all of the assets owned by you on the date of your death are considered when determining whether or not you reach the Maryland estate tax filing threshold. This can be confusing because this is not the case for probate assets. Probate assets are owned in your sole name on the date of your death without a beneficiary designation, a joint owner, or that were not previously titled in to the name of a trust.

The taxable estate and the probate estate may differ. For the taxable estate, the totality of the assets that were owned on the date of your death are included. The dates of death values for all assets are ascertained. This may include having real estate or tangible personal property appraised, having all stocks valued and getting the date of death value for all bank accounts. This also includes valuing businesses after the date of death.

Determining the value of assets for estate tax purposes depends on the nature of the asset and the requirement. In Maryland, a person is required to prepare a federal estate tax return pro forma. The evaluation requirements for a federal estate tax return pass through to the Maryland estate tax return as well.

Even though a Maryland estate tax return is required to be filed, it does not necessarily mean that taxes will be due. If the date of death value of the taxable estate exceeds the filing threshold, deductions may be available to reduce the tax liability. For example, charitable deductions, administrative expenses, certain debts of the decedent, and the marital deduction may be available to reduce or eradicate tax liability.