BREAKING NEWS: Maryland One Step Closer to Raising the Estate Tax Exemption

The Maryland Senate on Thursday passed a bill, already passed by the House of Delegates earlier this month, to increase the Maryland estate tax exemption over the next five years.  The amount of a Maryland resident’s estate which was exempt from estate tax was frozen at $1 million dollars back in January of 2004 when Maryland decoupled from the federal estate tax.  While the federal exemption amount has steadily increased over the years subjecting far fewer U.S. Citizens to paying the estate tax, the Maryland estate tax has remained at $1 million for the last decade. The increase in the Maryland estate tax exemption would be phased in over five years, starting with an increase from $1 million to $1.5 million in 2015.  By 2019, the Maryland exemption will match that of the federal government which is currently 5.34 million.

The bill was prompted by concerns among lawmakers that wealthy Maryland residents were moving out of the state to avoid the tax. Opponents argue that the measure would result in a loss of revenue to the state of more than $100 million a year.  The thought among lawmakers, however, is that the income tax dollars generated would far outweigh the loss of estate tax dollars at a later date.

Our focus, however, is on our clients.  Estate tax is calculated on a client’s gross estate at death.  That includes their house, their retirement funds and their life insurance among other things.  One can very quickly reach the $1 million dollar threshold through life insurance and real property ownership alone.  We find that while those traditionally subject to the estate tax here in Maryland are regarded as affluent, many of our clients who don’t identify with the term “affluent” find themselves affected by this tax.  Therefore, to the extent that our clients can pass greater wealth on to their families at their death, we are in support of the bill to increase the exemption.

Although this law is expected to go into effect with the Governor’s signature, there will still be a significant Maryland estate tax impact for several years as this greater exemption is phased in.  There are still estate planing concepts that can be adopted that will reduce any estate tax that might be imposed.

Please call our firm if you have further questions about the impact of the new bill on your estate.

By | 2016-12-13T09:14:18+00:00 March 24th, 2014|Maryland Legislation|0 Comments

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