Estate Taxes

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Estate Taxes for Maryland, Washington D.C. and Virginia

Maryland Estate Taxes

What is the Maryland estate tax? What is the tax rate?

This is the state tax imposed on the transfer of property in a decedent’s estate. There is no
Maryland estate tax rate table. This tax is calculated using the maximum allowable credit for
state death taxes under §2011 of the Internal Revenue Code, as computed for Maryland
purposes, less any inheritance tax paid to the Register of Wills. For decedents dying after
December 31, 2005, the tax cannot exceed 16% of the amount by which the decedent’s
taxable estate exceeds $1,000,000. If the inheritance tax is equal to or exceeds the credit
for state death taxes, no Maryland estate tax is due.

Who is responsible for filing the Maryland estate tax return?

The duly appointed personal representative of the decedent’s estate shall file the return. If
there is more than one personal representative, the return must be made jointly by all. If
there is no personal representative appointed, every person in actual or constructive
possession of any property of the decedent is required to make and file a return.

What are the requirements for filing a Maryland estate tax return?

Generally, a return is required for every estate whose federal gross estate, plus adjusted
taxable gifts, plus property for which a Maryland Qualified Terminal Interest Property (QTIP)
election was previously made on a Maryland estate tax return filed for the estate of the
decedent’s predeceased spouse, equals or exceeds $1,000,000, and the decedent at the
date of death was a Maryland resident or a nonresident but owned real or tangible personal
property having a taxable situs in Maryland.

The gross estate includes all property, real or personal, tangible or intangible, wherever
situated, in which the decedent had an interest. It includes such items as annuities, joint
assets with right of survivorship, transfers made without adequate consideration, the
includible portion of tenancies by the entirety, certain life insurance proceeds, and general
power of appointment property, to name a few. The value of the property must be based
upon an appraisal from a Certified Appraiser.

The probate estate is property of the decedent owned individually or as tenants in common.
Non-probate property is property that passes by the terms of the instrument under which it
is held or by operation of law. As a reminder, the total gross estate for estate tax purposes
includes probate and non-probate property. Refer to §2031 of the Internal Revenue Code to
determine the value of the gross estate.

How do I file the Maryland return? And when?

First complete the federal estate tax return, Form 706. For those estates not required to file
the federal return, you must still complete it in order to complete the Maryland return.
Complete Maryland Form MET-1, using the information from the federal return. Use the
appropriate version of Form MET-1 for the date of the decedent’s death. See Maryland
Estate Tax for a list of MET-1 forms.

The Maryland estate tax return may be filed with the local Register of Wills or the
Comptroller of Maryland within nine months after the date of death of the decedent.

If the estate tax return is filed with the Register of Wills, it must be filed with the Register of
Wills office for the county in which the estate is being administered. For nonresident
decedents, this is the jurisdiction in Maryland where the decedent’s property is located. The
Register must also complete Section III on the estate tax return to certify the payment of
any inheritance taxes.

If the estate tax return is filed with the Comptroller of Maryland, a certification of
inheritance tax must also be submitted, using a separate certification document provided by
the Register of Wills. A Maryland estate tax return is not deemed complete for processing
until the certification of inheritance tax is received by the Comptroller. Failure to file the
certification with the return will delay the processing of your return.

Where do I pay the Maryland estate tax?

Pay directly to the Comptroller of Maryland on or before the due date of the Maryland estate
tax return. Mail to:

Comptroller of Maryland
Estate Tax Section
P.O. Box 828
Annapolis, MD 21404-0828

Are there interest or penalty charges for late payment of the tax?

Yes. Maryland law provides for interest and late payment penalty if the tax is not paid when
due. Interest is assessed on any portion of the liability that is not satisfied by the statutory
due date, notwithstanding the fact that the tax is paid pursuant to an approved alternative
payment schedule. A penalty of up to 10% is charged on any Maryland estate tax not paid
by the due date.

Can I get an extension to file the Maryland return or pay the Maryland estate tax?

Yes. An extension to file the Maryland estate tax return will generally be allowed for up to
six months from the due date of the return or up to one year if the person required to file
the return is out of the country. The Maryland filing extension must be requested on or
before the statutory nine-month due date.

Use Form MET-1E to request a filing extension. For those estates that are requesting a
federal filing extension, include a copy of the federal Form 4768. There are also separate
provisions for granting an alternative payment schedule for the tax payment. See
Administrative Release #4 and Administrative Release #30 or contact the Comptroller’s
Office for more specific information on extensions and alternative payment schedules.

Can I get a refund if I overpay?

The law allows for refunds of Maryland estate tax up to three years from the date of the event that causes the refund to become due. File an amended Maryland estate tax return to make a request for a refund of previously paid Maryland estate tax.

What about the inheritance tax?

The inheritance tax is a separate tax imposed on the clear value of property that passes
from a decedent to some beneficiaries. Effective for decedents dying on or after July 1,
2000, all property passing to a surviving spouse, grandparent, parent, child or other lineal
descendant and their spouses, stepchild or stepparent, siblings and a corporation having
only certain of these persons as stockholders is exempt from inheritance tax.

The Register of Wills in each jurisdiction collects the inheritance tax. Contact the office in
the jurisdiction where the decedent lived for assistance.

What about the income tax on an estate?

An estate may be required to file a Maryland fiduciary income tax return, Form 504. Contact
the Revenue Administration Division for assistance with fiduciary returns by calling 410-
260-7980 in Central Maryland or 1-800-MD TAXES from elsewhere in the state, Monday
through Friday, 8:00 a.m. – 5:00 p.m.

What legislative changes affect the Maryland estate tax?

The federal Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) began
phasing out the federal estate tax, increasing the filing exemption amounts beginning with
estates of decedents dying on January 1, 2002. EGTRRA also phases out the IRC §2011
credit for state death taxes by 2005. Maryland’s estate tax is based on this credit.

Maryland first responded to the federal legislation with the Budget Reconciliation and
Financing Act of 2002, effective for estates of decedents dying after December 31, from the
phase-out of the federal credit for state death taxes. The Maryland estate tax was then
determined by using the allowable federal credit for state death taxes without reduction by
any act of Congress enacted on or before January 1, 2001. Maryland continued to recognize
the federal unified credit which meant that a Maryland return was only required if a federal
estate tax return was required to be filed.

Subsequent passage of Maryland’s Budget Reconciliation and Financing Act of 2004 has now
further “de-coupled” Maryland from the federal tax by freezing the applicable unified credit
at the amount that corresponds to an exemption exclusion of $1,000,000 for purposes of
determining the Maryland estate tax. This means that for decedents dying after December
31, 2001, a Maryland estate tax return is required for estates whose gross estate plus
adjusted taxable gifts is valued at $1,000,000 or more.

In 2006, legislation limited the tax to 16% of the amount by which the decedent’s taxable
estate exceeds $1,000,000 for decedents dying after December 31, 2005.

Virginia Estate Taxes in 2013 are none. Please check with your tax advisor due to legislative changes.

You can check for updates to the Virginia Estate Tax here.

Washington D.C. Estate Taxes

You can find all the information you ever wanted to know about Washington D.C. Estate Taxes here.