The Maryland inheritance tax is what I like to call the “sneaky death tax.”

For many families, the imposition of the federal estate tax and the Maryland estate tax is not a practical concern, since these taxes only apply to multi-million-dollar estates. However, the Maryland inheritance tax is a 10% tax on all distributions to individuals who are not otherwise exempt. Here are some common questions regarding the Maryland inheritance tax.

How is the 10% Maryland inheritance tax invoiced?

For example, suppose the last will and testament leaves the decedent’s $10,000 diamond engagement ring to her favorite niece. Along with that engagement ring, the niece will also receive a $1,000 invoice for inheritance tax from the Register of Wills. The niece will need to pay the $1,000 in very short order; otherwise, she will be subject to hefty fees and penalties for not paying promptly.

Who is exempt from the Maryland inheritance tax?

There are many notable exceptions to the Maryland inheritance tax. Chief among them is that spouses and children of the decedent do not pay the inheritance tax.

Who is responsible for paying the Maryland inheritance tax?

If a beneficiary distribution is subject to Maryland inheritance tax, and if the last will and testament is silent, then the beneficiary is responsible for paying the inheritance tax.

What if the distribution is made outside of the probate process?

Here is the sneaky part. Even if the beneficiary receives the distribution outside of the probate process (i.e., inherited as a beneficiary as a payable on death account or through a trust), the beneficiary is still subject to this 10% tax! The way this information is captured through the probate process is that the personal representative is obligated to identify all transactions subject to Maryland inheritance tax by completing the Information Report.

How does the Law Office of Adam J. Roa help?

During our initial consultation, we help identify Maryland inheritance tax issues and develop a plan to address them.

We assist families and beneficiaries through the Maryland inheritance tax process by:

• Identifying the inheritance tax payment obligation
• Identifying when the tax should be paid
• Determining if there is a need to file a Maryland application to fix the inheritance tax (This is necessary when the value of the asset is uncertain or fluctuates.)