Estate Tax in Rockville Probate Cases

There are three tax systems that are applicable to a Rockville estate.  The first is the State of Maryland inheritance tax, which is a tax on the right to receive assets at someone’s death.  The second is the estate income tax which may be collected at both the state and federal level.  Finally, there is the Maryland and Federal estate tax.  The overlay of the tax systems, and the difference between the Federal and Maryland systems may be complex to understand while administering an estate.

When managing an estate through the probate process in Rockville, it is important to be aware of the federal and state exemption amounts, the value of taxable property, and the applicable deadlines. Many people could find it beneficial to consult a knowledgeable estate planning attorney for assistance with the process.

Deadlines and Exemptions in Rockville

Estate tax in Rockville probate cases is due no later than nine months after the death of the individual whose estate is being probated. The state considers estate tax a charge for the privilege of transferring ownership of property. A tax return must be paid for every estate with a gross value over the exemption amount if the deceased person was either a Maryland resident, the owner of real estate, or possessed tangible personal property in the state.

Both federal and state governments levy an estate tax for entities valued over a certain amount, often referred to as the exemption threshold. The threshold for estate tax liability in Maryland is $5 million, much lower than the federal threshold of more than $11 million. This means an estate could be required to pay tax at the state level but not the federal level.

What Assets Could Be Subject to an Estate Tax?

The exemption threshold for payment of estate tax may seem high, but when a family business, life insurance, or farm is involved, the value of an estate could easily exceed the exemption amount. Many assets that are not considered part of a probate estate are subject to estate tax in Rockville probate cases.

All assets in the decedent’s control on the date of death, regardless of titling, are considered part of a taxable estate. Some examples of assets include:

  • Interests in real estate (even if jointly held)
  • Annuities
  • Personal property
  • Some life insurance proceeds
  • Bonds
  • Checking/Savings Accounts
  • Intangible property, such as intellectual property rights
  • Corporate stock or interests in closely held businesses

A certified appraiser could be necessary to value real estate, personal property, or business interests. The court-appointed personal representative of the estate is then responsible for paying the tax and filing the return.

Reducing Tax Liability

An estate’s tax liability could be reduced in several ways. For example, it is possible to deduct charitable contributions, administrative expenses, marital deductions and certain debts.

Estate tax in Rockville probate cases is calculated based on the maximum credit allowed for state death taxes under the federal Internal Revenue Code minus any inheritance tax paid. If the inheritance tax is equal to or exceeds the estate tax, then no estate tax will be due. However, estate tax remains payable until the inheritance tax is received by the government and a tax return must still be filed even if no tax is due.

Assistance with Estate Tax in Rockville Probate Cases

State and federal tax rules and rates change frequently. If a personal representative fails to file required returns or pay appropriate taxes, it could prove costly for the estate and could result in personal liability.

An experienced attorney could provide guidance on handling estate tax in Rockville probate cases. It is particularly important to understand how inheritance tax and estate tax obligations work together in a particular situation. To learn more about estate taxes, call an attorney today.