how much can you transfer free of maryland estate taxes

HOW MUCH CAN YOU TRANSFER FREE OF

MARYLAND ESTATE TAXES?

“Accumulating wealth can be challenging, and you may breathe a sigh of relief when you find that you will be able to make things easier for your loved ones after you are gone. This is well and good, but you do have to be aware of the potential impact of estate taxes.”

Colleen Sinclair Prosser Annapolis, Maryland Estate Planning Attorney

http://www.sinclairprosserlaw.com/

How Much Can You Transfer Free of Estate Taxes? www.sinclairprosserlaw.com 2

Accumulating wealth can be challenging, and you may breathe a sigh of relief

when you find that you will be able to make things easier for your loved ones

after you are gone. This is well and good, but you do have to be aware of the

potential impact of estate taxes. We will look at the taxes that may be a factor

for you in this paper.

FEDERAL ESTATE TAX

There is a federal estate tax in place, and it has been around since 1916. Every

estate is not subject to the tax, because there is a credit or exclusion that allows

you to transfer a certain amount of property before the tax would kick in.


There was a base exclusion of $5 million installed for the 2011 calendar year, and

after the American Taxpayer Relief Act of 2012 was passed, this exclusion was

made permanent. However, there have been ongoing adjustments each year

since 2011 to account for inflation.

After a series of adjustments, the exact amount of the federal estate tax

exclusion in 2015 is $5.43 million. You are probably going to see a somewhat

higher figure each year as inflation adjustments are added.

The maximum rate of the federal estate tax is 40 percent at the present time, so

we are talking about an attention-getting figure that can significantly impact your

financial legacy.

FEDERAL GIFT TAX

A logical response to the estate tax

would be gift giving while you are

alive. People used to be able to do

this for a few years after the original

enactment of the death tax, but a gift

tax was installed to close this

loophole.

The gift tax and the estate tax are unified, and this means that the $5.43 million

exclusion is a unified exclusion. It includes gifts that you give while you are living


along with the value of your estate. In other words, if you gave $5.43 million in

tax-free gifts while you are living using your unified exclusion, your available

exclusion would be exhausted. All of your estate would be subject to the estate

tax.

The estate tax exclusion is portable between spouses. This means that a

surviving spouse could use his or her own exclusion and the exclusion that was

afforded to his or her deceased spouse.

While we are on the subject of spouses, there is an unlimited marital transfer tax

deduction. Unlimited assets can be transferred to your spouse while you are

living or after you pass away free of federal transfer taxes. A caveat to this

statement would be that your spouse must be an American citizen to take

advantage of the unlimited marital transfer tax deduction.

STATE-LEVEL ESTATE TAX

There are a number of states in the union that have state-level estate taxes. We

practice law in the state of Maryland, and there is a state-level estate tax in our

state. At the present time, the Maryland state estate tax exclusion is $1.5 million

in 2015 and is set to increase over the next several years. As a result, you could

be exempt from the federal estate tax, but exposed to the Maryland state estate

tax.

We should point out the fact that there is a marital deduction on the state level


as well. You can transfer unlimited assets to your spouse without incurring any

Maryland state estate tax liability.

MARYLAND STATE INHERITANCE TAX

An inheritance tax and an estate

tax are two different things. An

estate tax is levied on the

entirety of the taxable portion of

an estate, and an inheritance tax

is levied on transfers to each

individual inheritor that is not

exempt.

There is no federal inheritance

tax, but there are six states that have state-level inheritance taxes Maryland is

one of them, so you should be aware of this tax when you are planning your

estate as a Maryland resident.

SUMMARY

On the federal level, you can transfer $5.43 million tax-free using the federal

estate tax exclusion or credit. Maryland has its own state-level estate tax, and

that exclusion is $1.5 million in 2015.


There are legal steps that you can take to mitigate the burden if you are exposed

to estate taxes. To explore your options, schedule a consultation with a licensed

estate planning attorney.

REFERENCES

Forbes

http://www.forbes.com/sites/janetnovack/2012/10/14/the-forbes-guide-to-

estate-planning/

IRS

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estate-and-

Gift-Taxes

Collaborative Research Project

http://lobby.la.psu.edu/027_Estate_Tax/frameset_estate.html

http://www.forbes.com/sites/janetnovack/2012/10/14/the-forbes-guide-to-estate-planning/

http://www.forbes.com/sites/janetnovack/2012/10/14/the-forbes-guide-to-estate-planning/

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estate-and-Gift-Taxes

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estate-and-Gift-Taxes

http://lobby.la.psu.edu/027_Estate_Tax/frameset_estate.html


About the Author

Colleen Sinclair Prosser

Currently the owner and manager of SinclairProsser Law, LLC, Colleen steers her firm with both a guiding hand and direct

involvement with the clients, bringing to the table a wealth of Estate Planning experience from many years spent at the helm

of a busy law practice. Colleen is currently serving on the Board of Trustees for By Their Side, Lifelong Advocates for

Marylanders with Developmental Disabilities. She formerly served on the Board

of Governors of the American Academy of Estate Planning Attorneys in the past.

EXPERIENCE An established member of the American Academy of Estate Planning Attorneys, Colleen offers years of experience in estate preservation and transfer. A strong

proponent of the living trust, she also focuses on wills, powers of attorney, living wills, probate, trust administration, prenuptial agreements, nursing home

planning, and special needs planning. She strongly endorses long-term care insurance and, in certain cases, life insurance and some annuities as valuable estate preservation vehicles, and strives to assure the compatibility of her clients’

estate plan and financial plan. Sensitive to the challenges presented by lifestyle and circumstance, Colleen addresses each situation with personal attention,

wisdom, and skill.

SinclairProsser Law, LLC www.sinclairprosserlaw.com

ANNAPOLIS 900 Bestgate Road Suite 103

Annapolis, MD 21401 Phone: (410) 573-4818 Fax: (410) 573-2802

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Millersville, MD 21108 Phone: (410) 573-4818 Fax: (410) 573-2802

BOWIE 14300 Gallant Fox Lane, Suite 204

Bowie, MD 20715 Phone: (301) 970-8080 Fax: (410) 573-2802

WALDORF Waldorf Business Suites, LLC

3195 Old Washington Rd, Ste 102 Waldorf, MD 20601

Phone: 800-366-4615

http://www.sinclairprosserlaw.com/