Maryland Estate Tax Exemption
The Maryland estate tax threshold for 2025 is $5 million, and has been since 2019. This means that if you die and your total estate is worth less than $5 million, the estate owes nothing at all to the state of Maryland.
Many people worry about the estate tax affecting the inheritance they pass along to their children, but it's not a reality most people will face. In 2025, the first $13,990,000 of an estate is exempt from federal estate taxes, up from $13,610,000 in 2024. Estate taxes are based on the size of the estate.
If you have no spouse and any of your children are alive, they are the only heirs to your estate. However, if your spouse is alive, that's a different story. If you have children who are minors, your spouse will inherit half of the intestate property and your children will inherit the other half.
The best way to avoid the inheritance tax is to manage assets before death. To eliminate or limit the amount of inheritance tax beneficiaries might have to pay, consider: Giving away some of your assets to potential beneficiaries before death. Each year, you can gift a certain amount to each person tax-free.
If you received a gift or inheritance, do not include it in your income. However, if the gift or inheritance later produces income, you will need to pay tax on that income.
An inheritance tax is levied on the value of the inheritance received by the beneficiary, and it is paid by the beneficiary. There is no federal inheritance tax. Inherited assets may be taxed for residents of Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
For the inheritance process to begin, a will must be submitted to probate. The probate court reviews the will, authorizes an executor and legally transfers assets to beneficiaries as outlined. Before the transfer, the executor will settle any of the deceased's remaining debts.
A probate attorney can help you determine if the estate needs to go through the probate process. Regular Estate - property of the decedent subject to administration in Maryland is es- tablished to have a value in excess of $50,000 (in excess of $100,000 if spouse is sole heir).
Another key difference: While there is no federal inheritance tax, there is a federal estate tax. The federal estate tax generally applies to assets over $13.61 million in 2024 and $13.99 million in 2025, and the federal estate tax rate ranges from 18% to 40%.
When a house is transferred via inheritance, the value of the house is stepped up to its fair market value at the time it was transferred, according to the IRS. This means that a home purchased many years ago is valued at current market value for capital gains.
Immediately after receiving an inheritance, you should notify your local Social Security office.
0.9% tax on the clear value of property passing to a child or other lineal descendant, spouse, parent or grandparent. 8% on property passing to siblings. 10% on property passing to other individuals.
Assets like joint bank accounts, life insurance policies, trusts, and retirement accounts are exempt from probate and will usually be passed on to the named beneficiary or beneficiaries upon an individual's death.
Specifically, compensation for executors is generally calculated as a percentage of the estate's gross value. According to § 7-601 of the Estates and Trusts Article, the standard compensation scheme is as follows: 9% on the first $20,000 of the gross estate. 3.6% on the balance of the estate over $20,000.
In Maryland, you can make a living trust to avoid probate for virtually any asset you own—real estate, bank accounts, vehicles, and so on.
An heir can claim their inheritance anywhere from six months to three years after a decedent passes away, depending on where they live. Every state and county jurisdiction sets different rules about an heir's ability to claim their inheritance.
Deposit the money into a safe account
Your first action to take when receiving a lump sum is to deposit the money into an FDIC-insured bank account. This will allow for safekeeping while you consider how to make the best use of your inheritance.
This is a huge amount of money, and yet it is not even close to the amount someone your age would need to retire. (However, if you choose to, it could get you comfortably into your first home, which might be a good investment for you.)
Many states assess an inheritance tax. That means that you, as the beneficiary, will have to pay taxes when you receive an inheritance. How much you'll be assessed depends on the state you live in, the size of your inheritance, the types of assets included, and your relationship with the deceased.
Inheritance checks are generally not reported to the IRS unless they involve cash or cash equivalents exceeding $10,000. Banks and financial institutions are required to report such transactions using Form 8300. Most inheritances are paid by regular check, wire transfer, or other means that don't qualify for reporting.
This means that when the beneficiary withdraws those monies from the accounts, the beneficiary will receive a 1099 from the company administering the plan and must report that income on their income tax return (and must pay income taxes on the sum).