New Maryland legislation that was passed in April of 2018 will set Maryland estate tax exemption at $5 million for decedents who pass away on or after January 1st, 2019. This will be raised from $4 million, the amount of inheritance exempt from the Maryland estate tax in 2018, and this change will impact many wealthy decedents and their heirs who are eligible to receive inheritances of $5 million or less. Here, Maryland estate planning attorney Douglas C. Lauenstein of the Law Office of Douglas C. Lauenstein provides an overview of the important details surrounding the new Maryland estate tax exemption of 2019.
A Maryland Estate Tax is Collected on Estates Exceeding $5 Million, Beginning in January
An estate tax, which is colloquially called a “death tax,” is a tax that states as well as the federal government collect on wealthy estates in the period after the estate’s owner dies and before the remaining estate can be distributed to the decedent’s heirs. Beginning in 2019, individuals who die with an estate exceeding $5 million will be subject to a tax on their estate that must be paid before the money can be dispersed to their heirs. Individuals whose wealth is less than the $5 million threshold will not be required to pay a tax to the state of Maryland.
Estate Taxes Differ on a State and Federal Level
While the federal estate tax increases over time, the Maryland estate tax will not be subject to inflation. In addition, the federal estate tax rate is also higher than the Maryland estate tax rate, equaling $11.18 million in 2018 as a result of the 2017 tax law.
In addition, the Maryland estate tax also differs from the inheritance tax. An inheritance tax is imposed on assets once they have already been granted to the recipient, whereas estate taxes are collected before the inheritance is passed on. Under the new Maryland estate tax exemption, the inheritance tax remains unaffected.
Additional Details Regarding the Maryland Estate Tax Law
The new Maryland estate tax exemption will not impact the maximum Maryland estate tax rate of 16 percent. In addition, the new changes to Maryland estate tax exemption signals a new trend following the enactment of the 2017 Tax Act—specifically, states will be actively reviewing and possibly changing their tax laws as a result of new federal tax changes. Additionally, legislation has also been passed in the city of Washington, D.C. that will set the estate tax exemption amount at $2,185,800 for those who die on or after January 1st, 2019.
Schedule a Consultation with Maryland Estate Planning Attorney Douglas C. Lauenstein Today
The new Maryland estate tax law will allow wealthy inheritances to be a maximum of $5 million to be exempt from estate taxes, a $1 million raise from the former Maryland estate tax law. The Maryland estate planning attorney Douglas C. Lauenstein has decades of experience providing legal counsel for individuals planning out their wills and estates and can aid you in your estate planning strategy. For more information on the new Maryland estate tax exemption of 2019, contact the Law Office of Douglas C. Lauenstein today.