On May 15, 2014, Maryland Governor Martin
O’Malley signed into law House Bill 739 ("Estate Tax Bill") raising
Maryland’s Estate Tax Exemption from $1 Million to match that of the federal
estate tax exemption in 2019. Although
the bill is effective July 1, 2014, it is implemented over a five (5) period
and the "recoupling" of the Maryland and federal estate tax exemption
equivalents will not be complete until January 1, 2019. Currently the federal estate tax exemption
equivalent is $5.34 Million and it is indexed for inflation, meaning that this
amount generally increases every year.
The Estate
Tax Bill was heavily supported in both the Maryland Senate and House of
Delegates passing by votes of 36 to 10 and 119 to 14, respectively. Testimony was presented in hearings for both
the House and the Senate that the exemption needed to be raised to entice
Maryland’s wealthy residents to remain in Maryland for the rest of their lives
instead of moving to a more estate tax friendly jurisdiction like Virginia or
Florida.
Maryland's
reputation for being a bad place to die had been reported in several prominent
news publications. Indeed, a recent
article on Forbes.com listed Maryland as one of the worst places to die in
2014. Prior to this recent enactment of
the Estate Tax Bill, Maryland was one of
eight states that had an estate tax exemption of $1 million or less. Maryland
and New Jersey were also the only states to have both an inheritance tax and an
estate tax. Note that Maryland still imposes an inheritance tax against non- lineal descendants (cousins, friends, etc.) at a
tax rate of 10 percent.
The phase-in
period for the Estate Tax Bill will begin January 1, 2015 and the exemption equivalent
will increase over the subsequent four years until it recouples with the
federal exemption amount on January 1, 2019.
The
enactment of the Estate Tax Bill creates significant planning opportunities for
Maryland residents and non-residents owning real property in Maryland. You should contact your estate planning
attorney in the near future to discuss how the 2014 Estate Tax Bill impacts
your estate plan. The estate planning
attorneys at Adelberg, Rudow, Dorf, & Hendler, LLC have been closely
monitoring the Estate Tax Bill and its implications and are happy to meet and
discuss your individual options.
