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| SUMMARY OF APPLICABLE ESTATE TAX CONSIDERATIONS | |||||||||||||||||||||||||
| Federal Estate Tax: Congress passed legislation that will gradually decrease the estate tax rates and increase the personal exemption levels until 2009. The current legislation repeals the estate tax in 2010, and revives it in 2011 unless new legislation is passed.
Federal Estate Tax Exemptions: At death, a person can leave property to anyone up to the personal exemption level without having to pay any federal estate taxes on that property. In addition, spouses can leave an unlimited amount of property to each other at death without incurring tax consequences as long as the surviving spouse is a U.S. citizen. Furthermore, all gifts to tax-exempt charities are exempt from estate taxes. Finally, the taxable estate does not include expenses and debts paid by the estate. Federal Gift Tax: A person can gift up to $1 million throughout his lifetime in excess of the annual exemption (currently $12,000 per year) to non-spouses without having to pay gift taxes. However, these gifts reduce the amount of personal estate tax exemption that is available at death. Once the $1 million limit is exceeded, a person must pay gift tax at the same rate as the estate tax rate. A person can gift an unlimited amount to his spouse without incurring gift tax consequences. Maryland Estate Tax: The personal exemption level for a decedent who owned property in Maryland is $1 million. Therefore, if assets greater than that amount are transferred after death to a non-spouse, the estate will be required to pay Maryland estate tax (even if no federal estate tax is owed). The maximum estate tax rate in Maryland is sixteen percent (16%). Maryland Inheritance Tax: Maryland imposes an inheritance tax of ten percent (10%) on property that passes at death to someone other than a spouse, parent, grandparent, sibling, child, descendant of a child, spouse of a child, or a corporation whose shareholders are within the exempt class. Inheritance tax is deducted from the estate tax. Income Tax: The decedent’s estate will be required to file an income tax return if the estate earned income during the estate administration period that exceeds a certain limit. The personal representative will be required to pay personal income tax for any commission awarded for serving in this capacity. U.S. TREASURY CIRCULAR 230 NOTICE: Any tax advice contained herein was not intended to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or by any other applicable tax authority. This disclosure is included to assure compliance with new standards of professional practice. |
For assistance with your estate planning needs, please contact the Law Office of Jill A. Snyder, LLC at (410) 864-8788
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