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Introduction: The Significance of the Maryland Estate Tax in Estate Planning
When it comes to developing a truly well-informed estate plan, understanding Maryland’s estate tax structure (i.e. its thresholds, rates, payment procedures, etc.) is essential. Maryland imposes a state level estate tax, separate from the federal estate tax. The federal estate tax is also something which all Marylanders should learn about, but we won’t dive into any details on the federal tax today.
When a person passes away, his or her collective assets and debts are combined together to produce his or her estate. If the net result of this combination is positive, then the estate will distribute the remaining assets (after debts are satisfied) to beneficiaries. Married people have a combined estate, as they are regarded as a single “entity” for estate tax purposes, and so married people have their own separate estate tax threshold.
In this post, we will go over the current structure of the Maryland estate tax, and provide an update on recent changes and likely changes which may occur in the near future.
Current Situation as of May, 2025
For the current year, the threshold for the Maryland estate tax is as follows: for all single individuals, the threshold is $5 million, and for all married couples (claiming portability) the threshold is doubled to $10 million. This means that those individuals with an estate valued at less than $5 million at the time of death are exempt from the tax altogether. Importantly, computing a person’s estate is a complex endeavor which requires mastery of certain rules, and so an expert is needed to perform this computation when someone passes.
When someone’s estate passes the threshold, a graduated rate structure is imposed: currently, as of May, 2025, the rate structure has a bottom rate of 0.8% and a top rate of 16%. The imposition of the tax follows the system which applies to individual income taxes at the federal level (i.e. a blended rate is collected for those estates which trigger the top rate of 16%).
Governor Wes Moore’s Proposed Changes Defeated
Earlier, in January of 2025, Maryland Governor Wes Moore proposed changes to the current estate tax law. Specifically, he wanted to reduce the thresholds to $2 million and $4 million for individuals and married couples, respectively. These changes were not adopted, and so the current rates referenced above will apply for at least the duration of the current year. Mr. Moore wanted to lower these thresholds in the hope that this change would lead to increased tax revenues and a more balanced state budget. The defeat of the proposed change had to do with a concern regarding wealthy residents relocating in the wake of such a change. If this change had been adopted, too many lawmakers believed that residents would simply flee Maryland before the change could produce beneficial results.
Estate Tax vs. Inheritance Tax
It’s important to emphasize that this estate tax in Maryland is distinct from the state’s inheritance tax. Maryland remains one of just a few states in the country which still collect a separate inheritance tax apart from an estate tax. The inheritance tax is paid by the beneficiaries who receive assets from a decedent. In the future, we will come back and provide an update for 2025 on Maryland’s inheritance tax.
Contact the Murphy Law Firm for Additional Information
Readers who want to know more about Maryland’s estate tax, Maryland’s inheritance tax, estate planning in general, or any other related topic, contact one of the estate planning attorneys at the Murphy Law Firm today by calling 240-219-5243.
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