When you inherit an estate in Maryland, it’s important to understand the tax implications and how to reduce them. In this way, you can ensure you manage your inheritance effectively.
Estate and inheritance taxes
Maryland is one of the few states that impose both an estate tax and an inheritance tax. The estate tax applies to the entire value of the decedent’s estate. Additionally, the inheritance tax is levied on the value of specific assets inherited by beneficiaries.
The estate tax exemption is $5 million for 2024, meaning estates valued below this amount are not subject to estate tax. However, the inheritance tax rate varies from 0% to 10%, depending on the beneficiary’s relationship to the decedent.
Strategies to cut your tax burden
There are several strategies to help cut the tax burden when inheriting an estate. First, consider utilizing the marital deduction. This allows the transfer of assets to a surviving spouse without incurring estate or inheritance taxes.
Additionally, making lifetime gifts can reduce the estate’s value and potentially lower the estate tax owed. Establishing trusts can also be a useful tool in estate planning to manage and distribute assets in a tax-efficient manner.
Planning ahead for estate administration
Knowing the tax implications of inheriting an estate, and using strategies to cut them, can benefit your finances and your beneficiaries. Effective estate administration and planning ensure a smooth transition. It can also reduce the tax burden on your inheritance. Staying informed and getting professional advice can help you handle estate and inheritance taxes in Maryland.