When someone passes away and you are serving as the executor or personal representative, one of the most critical tasks is correctly filing estate tax. A professional estate administrator such as an attorney is highly recommended for this and the many other complex aspects of estate administration. Maryland estate tax is different than most other states, as most states do not have a state estate tax in place.
First, Determine if the Estate Owes Taxes
In 2018, all estates valued in excess of $4 million owe taxes to the state of Maryland. The federal estate tax exemption is $11.18 for 2018. In 2019, Maryland’s estate tax is set at the federal estate tax level. In the meantime, if the decedent passed in 2018, the maximum Maryland estate tax that an estate could owe is 16 percent.. Calculating the value of an estate can be difficult. The following must be taken into account when adding up all of the assets within an estate:
- Taxable gifts;
- Real property;
- Bank accounts;
- Retirement funds and 401(k) accounts;
- Stocks and bonds;
- Life insurance (if the estate is the beneficiary);
- Assets held as tenants in common;
- Annuities; and more.
Compiling all of the various assets is time consuming and complicated. Certain assets can easily be missed or disregarded as non-taxable, when they should be included. Making an error can be costly, and even more time-consuming, adding stress to the job of the executor or estate administrator. Executors can be sued for neglecting their fiduciary duty to the estate. If assets have already been distributed to the beneficiaries, a tax filing error becomes even more complicated.
Meeting Maryland’s Estate Tax Deadlines
Time can seem to slip away in the weeks and months following the loss of a loved one. The Maryland estate tax filing deadline, for this reason, is something that some executors fail to meet. An estate tax return should to be filed within nine months of the decedent’s death, unless the Comptroller’s Office has granted an extension. There are some serious implications if you fail to file a tax return, on behalf of the decedent so be sure to get sound legal advice as to how this process works.
Inheritance Tax
In Maryland, there is also an inheritance tax. An inheritance tax is imposed on the assets received by a beneficiary from the estate. An inheritance tax is paid to the Register of Wills. An attorney can determine whether or not inheritance tax is owed. The Maryland estate tax is separate from estate tax, but heirs are not double taxed. Inheritance tax paid is subtracted from the estate tax liability. Whatever remains after distribution to the heir is the owed estate tax. If the inheritance tax paid is equal to or greater than what is owed as estate tax, then no estate tax is due.
Call Maryland Estate Administration Attorney Tara K. Frame
If you are an executor or a personal representative tasked with administering a large estate, we urge you to contact the Maryland estate administrators of Frame & Frame at 410-255-0373. We will help you file taxes on time, properly, ensure that you do not pay more than the estate owes, and ensure that all of the other duties in closing an estate are accomplished on your behalf. Schedule a private consultation now.
Additional Resources:
taxes.marylandtaxes.gov/Resource_Library/Tax_Publications/Tax_Tips/Personal_Tax_Tips/tip42.pdf
https://frameandframe.com/solve-inheritance-issues-before-your-death/