This article was previously published in I95 Business Magazine by Tara Frame. Recently, one of my colleagues wrote an article on why Maryland is a nice place to live, but a bad place to die. There was a lot of great information in this article, most importantly a graph showing how each state ranks for estate taxes. Maryland inheritance taxes are among the highest in the nation and by levying both an estate tax and an inheritance tax, the risk exposure could be significant. However, with proper planning, you may be able to minimize your exposure and potentially reduce your family’s obligations for taxes. If you are planning to leave assets to your family members or to organizations that you support, you may also need help learning about ways to minimize liabilities under these two systems of taxation. The Maryland estate planning attorneys at Frame & Frame can evaluate your situation to assist in creating strategies that will help. Here’s how it breaks down and some things you can do to plan ahead.
Federal Estate Tax
For 2022, the Federal Estate exemption is $12,060,000 per person, meaning that the tax only applies if a single person’s estate exceeds $12.6 million (doubled for a married couple to $24,120,000) pursuant to the TCJA of 2017. However, that provision is set to expire as of Jan. 1, 2026, when the exemption would return to its previous amount of $5 million (adjusted for inflation), unless otherwise changed by Congress.
Maryland Inheritance Tax
Maryland imposes both an estate tax and an inheritance tax, making it regretably unique among U.S. states as the only one currently levying both forms of death taxes. In contrast, the Maryland inheritance tax is imposed on the beneficiary receiving the property, taxing the privilege of inheriting rather than the estate as a whole. This tax applies at a flat rate of 10% on the clear value of assets passing to non-exempt beneficiaries—such as nieces, nephews, friends, or more distant relatives—while close family members like spouses, children, grandchildren, parents, and siblings are fully exempt. Unlike the estate tax, the inheritance tax has no minimum exemption threshold based on estate size and is collected separately by the Register of Wills. Joint accounts and payable on death beneficiary designations might be options to help reduce or avoid these taxes. It is important to work with the experienced estate planning attorney’s at Frame & Frame to review the available tools and strategies.
Maryland Estate Tax
The Maryland estate tax is a tax on the estate itself, calculated based on the total value of the decedent’s gross estate (including assets like cash, investments, real property, and business interests) if it exceeds the state’s exemption amount of $5 million per individual. It functions as a transfer tax on the right to pass wealth at death, with rates up to 16% on the amount above the exemption, and any inheritance tax paid is credited against the estate tax liability to avoid double taxation on the same assets. Many family estates exceed the Maryland estate tax exemption amount, when investments and real estate assets are considered, and therefore must be evaluated in your estate planning. The exemption applies to the total gross value of the estate, including, but not limited to, cash, stocks and investments, real property, personal property, and the value of LLC memberships or corporate shares. All these assets can add up and quickly exceed the estate tax exemption. There are several tools that can help avoid the estate taxes, including trusts and LLCs. Maryland’s Inheritance Taxes are not a light matter and should be considered strategically.
Unlimited Marital Deduction
A benefit that accrues to married people to reduce the estate taxes is the unlimited marital deduction, which permits a person to transfer an unrestricted amount of assets to their spouse at any time, including at the death of the first spouse, free from the estate taxes and any potential gift tax. This tax provision, in effect, postpones the estate taxes until the death of the second spouse, when those assets are then transferred to the children or other beneficiaries. When the first spouse passes, it is extremely important to review and revise the plan to ensure that the children will also receive their inheritances free from the estate taxes.
Income Taxes
Maryland estates and trusts may also be subject to income taxes, which are separate and apart from death taxes. If an estate or trust receives income of more than $600 per year, then it may need to file a tax return reporting that income and is subject to income tax. In that instance, the Personal Representative of an estate or the Trustee of a trust is required to file a Maryland Fiduciary Tax Return (Form 504) and a U.S. Income Tax Return for Estates and Trusts (Form 1041). A properly drafted estate plan can avoid income taxes, such as ensuring that all income from a trust is distributed annually to avoid the necessity of reporting any income.
Gift Taxes
During your lifetime, you may make gifts to others (e.g., cash, stocks, land, a new car), but you must be aware of the rules of gifting from a tax perspective. As of 2025, the annual gift tax exclusion is $19,000 per recipient. This allows an individual to give up to $19,000 (or $38,000 for a married couple splitting gifts) to any number of people each year without incurring gift tax, without reporting the gift (unless splitting), and without reducing their lifetime exemption. This amount applies to gifts of present interests and is adjusted annually for inflation.
Utilizing a Trust
At Frame & Frame, we work with you to evaluate your exact circumstances and the impact of Maryland inheritance taxes. We suggest and create the legal strategies that will work to minimize you and your loved one’s exposure. Frequently, we set up trusts to allow assets to bypass probate and avoid federal and state estate taxes. By using a trust, an estate could avoid estate taxes entirely. This is where estate planning becomes invaluable to you, and those who will inherit your assets.
Limited Liability Companies
In some cases, an LLC can be utilized as an estate planning tool, especially for small businesses, as they can help you pass assets to your children while avoiding gift and estate taxes. An LLC is a pass-through entity, meaning that it does not file a separate tax return but reports income and losses on a Schedule C as part of your personal tax return. At Frame & Frame, we work with your CPA or Financial Advisor to collaborate on the best strategies for you and your business.
As you can see, there are some significant benefits to planning ahead. Reach out today to schedule a consultation with one of our top-rated Maryland estate planning attorneys.
This article was published in I95 Content Marketing.
Tara Frame is the Managing Partner of Frame & Frame Attorneys at Law – an estate planning firm that has over 70 years of service to the community. Tara is a graduate from Johns Hopkins University and the University of Baltimore School of Law. The firm has consistently been rated as a Best Law Firm and has received hundreds of 5 star reviews.
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