Governor Martin O’Malley signed into law legislation on May 15, 2014 increasing the Maryland estate tax exemption over the next five years to equal that of the federal estate tax. Currently, Maryland’s $1.0 million estate tax exemption will continue for people dying in 2014. It will then increase as follows:
- $1.5 million: decedent’s dying in 2015
- $2.0 million: decedent’s dying in 2016
- $3.0 million: decedent’s dying in 2017
- $4.0 million: decedent’s dying in 2018
- Equal Federal exemption for decedent’s dying in 2019 and beyond
The current federal estate tax exemption is $5.34 million as indexed for inflation.
Maryland’s current top estate tax rate shall remain the same at 16%.
Additionally, Maryland is introducing “portability,” which will, in essence, allow the first spouse to die to gift the difference between the estate tax exemption and their estate exemption to their surviving spouse. For example, if the first spouse dies owning $1.34 million in assets, the surviving spouse will inherit $4 million of exemption to use along with their own $5.34 million of exemption, providing the second spouse with $9.35 million of estate tax exemptions. This will allow for simpler estate plans with the same estate tax benefits. Portability in Maryland is set to take effect when the state exemption matches the federal exemption in 2019, but there is currently a bill in the Maryland Senate to make it available immediately. Maryland is on the cutting edge, as one of the first states to adopt portability.
This will not affect Maryland’s 10% inheritance tax, which imposes a tax for the person receiving the asset rather than the estate if the recipient is not a closely related person such as a spouse or child.
Similar to New York and Minnesota, Maryland is the latest state to increase the estate tax exemption.