Montgomery County Estate Tax

When an estate meets certain thresholds, it is subject to taxes. In general, Montgomery County estate taxes apply to estates valued at or above $5 million while federal taxes apply to estate valued at $11.4 million. A well-versed estate planning attorney can further explain the tax obligations and how they may apply to your estate.

What is an Estate Tax in Montgomery County?

An estate is taxed in Montgomery County based on two tax systems. One is the Federal Estate Tax System and the other one is the Maryland State Estate Tax System. The Federal Estate Tax System applies to all U.S. residents and the estate tax filing threshold is currently $11.4 million per person. In other words, if a person dies with an estate that is worth more than $11.4 million, the estate is subject to estate taxes at a maximum rate of 40 percent.

The other tax system that a person has to consider even if the federal estate tax does not apply is the Maryland Estate Tax System which applies to estates above $5 million. Another tax system that may apply is an inheritance tax. If a person is the beneficiary of an estate and receives funds from the estate, that person may be subject to pay inheritance tax.

Understanding Tax Returns

An Estate Tax Return is a tax return that is due for estate that is at or above $5 million and is due nine months from the date of death. While an individual can apply for an automatic six-month extension to file the return, there is no extension available to pay the taxes due. An estate administration attorney or accountant can prepare the estate tax return. A U.S. Federal Estate Tax Return would have to be prepared for an estate that meets the federal filing threshold which is currently $11.4 million.

The Personal Representative is responsible for having the decedent’s final income tax return prepared and filed showing any income that was generated from January 1st of the year that the decedent died to the date that the decedent died. If a person died on March 1st, then the decedent’s final income tax return would reflect any income that the decedent earned from January 1st of that year through March 1st, the date of death.

In addition to the decedent’s final income tax return, the Personal Representative also has to be aware that a Fiduciary Income Tax Return may have to be prepared if the estate generated a specified amount of income. If an estate generates an income after the person’s date of death, and if it meets certain filing requirements, then a Fiduciary Income Tax Return would be necessary.

Documents to Submit with a Return

Several documents have to be submitted with the estate tax returns, along with the prepared estate tax return. Those documents include:

  • The Death Certificate of the person who has died
  • The Letters of Administration for the person who has been appointed Personal Representative of the person’s estate
  • Decedent’s Last Will and Testament
  • Revocable Living Trust, if any
  • Appraisals for all real estate, businesses, and tangible personal property
  • Documentation to support date of death valuations or alternate valuations
  • Funeral and memorial invoices

These documents show that the person has the authority to submit an estate tax return on the decedent’s behalf as well as all the assets of the estate.

Considerations when Planning an Estate

When a person is in the process of estate planning, it is good to keep in mind all of the estate tax filing thresholds. These thresholds will help determine the estate plan they choose. Married couples especially need to use certain types of planning techniques to potentially save on estate taxes.

Besides estate taxes, people should also consider how they want their assets to be distributed as well as their specific family circumstances. The age of the individuals they would like to name as beneficiaries of their estate and the likelihood of that person surviving them are also important to consider, because additional provisions or successor provisions may be necessary if there is even a small likelihood that the main beneficiary may not survive them.

Ask an Attorney About Montgomery County Estate Taxes

When estate planning, you should be aware of the Maryland Estate Tax Filing threshold. If your estate is valued anywhere close to the $5 million filing threshold, an attorney should draft your estate plan and provide you with all of your options. To learn more about Montgomery County estate taxes, call today to speak with a knowledgeable attorney.