Estate Planning Laws in Maryland

Estate Planning Law in Maryland: Overview

Maryland is the only state that imposes both a state estate tax and a state inheritance tax, making estate planning particularly critical. The estate tax applies to estates exceeding $5 million, with a top rate of 16%. The inheritance tax applies at 10% to property passing to beneficiaries other than close family members. Maryland is a common law property state with an elective share of one-third (or one-half if no children). The state does not recognize holographic wills; two witnesses are required. Maryland has its own probate system with Orphans' Courts in most counties. The small estate threshold is $50,000 ($100,000 if the sole heir is the surviving spouse).

Key Statutes & Deadlines

Dual Estate and Inheritance Tax

Maryland is unique in imposing both an estate tax and an inheritance tax. The estate tax applies to the total estate value exceeding $5 million, with rates up to 16%. The inheritance tax is 10% on property passing to certain beneficiaries—but close relatives (spouse, children, parents, grandchildren, siblings, and spouse of a child) are exempt. Unrelated beneficiaries, including unmarried partners and friends, face the 10% inheritance tax. The inheritance tax paid is credited against the estate tax liability, so there is no double taxation on the same property. Planning to minimize both taxes is a key concern for Maryland residents.

Orphans' Court System

Maryland uses Orphans' Courts in most counties (except Harford and Montgomery, which use Circuit Court judges) to handle probate matters. The Orphans' Court is composed of three elected judges who do not need to be lawyers. These courts oversee will probate, appointment of personal representatives, estate administration, and guardianship matters. The system is relatively accessible and informal compared to many other states. Regular administration applies to larger estates, while small estate procedures are available for estates meeting the threshold requirements.

Estate Tax Portability

Maryland allows portability of the state estate tax exemption between spouses, meaning the surviving spouse can use the deceased spouse's unused exemption. This effectively allows a married couple to shield up to $10 million from state estate tax. To preserve portability, a Maryland estate tax return should be filed even if the estate is below the exemption threshold. This planning technique is critical for married couples whose combined estates exceed $5 million.

Maryland Court System

Maryland probate is handled by the Orphans' Court in most counties and by Circuit Court judges in Harford and Montgomery counties. The Register of Wills in each county manages estate filings and provides administrative support. Orphans' Courts are composed of three elected judges. The probate process involves filing the will, appointing a personal representative, inventorying assets, notifying creditors, and filing accountings. Maryland has both regular and small estate administration tracks. Appeals from the Orphans' Court go to the Circuit Court and then to the Court of Special Appeals.

Damages & Penalties

Maryland's dual estate tax (up to 16%) and inheritance tax (10% on non-exempt transfers) create significant tax exposure. Both taxes are due nine months after death. The inheritance tax is credited against the estate tax. Fiduciaries face liability for breach of duty. The Register of Wills monitors estate administration and can petition for removal of delinquent personal representatives. Maryland criminalizes will destruction, fraud, and undue influence in estate planning contexts.

Recent Legislative Changes

Maryland increased its estate tax exemption to $5 million and added portability between spouses. The state has also updated its small estate procedures and modernized aspects of its probate code.

Frequently Asked Questions