Probate Updates: Bigger Estate Limitations and Changes to Estate Tax Rules
Did you know that probate procedures in Maryland can differ based on the size of the decedent’s estate? It’s true. The rules of that govern estate administration procedures are based on the value of the assets in an estate. Depending on the value of the assets, an estate will be considered either a “regular” or a “small” estate.
Not long ago, Maryland law was changed to increase the maximum value of a decedent’s assets that qualifies for probate administration as a small estate from $30,000 to $50,000. However, an exception is made for an estate for which the surviving spouse is the sole legatee or heir of the decedent… in those cases, the assets could total as much as $100,000 and still be considered a “small” estate.
This change benefits most Marylanders because regular estates have certain requirements that small estates do not. Also, estates that qualify for probate administration as small estates are exempt from the federal and state estate taxes, as well as Maryland’s inheritance tax.
I would also like to tell you about some changes to Maryland and Federal rules concerning estate taxes. As defined by the IRS, “The Estate Tax is a tax on your right to transfer property at your death.”
As of 2016, the federal government imposes a tax on taxable estates in excess of $5.45 million (the individual federal exemption amount, which increases for inflation annually). This amount is up from $5.43 million in 2015. That means an individual can leave $5.45 million to heirs and pay no federal estate or gift tax. A married couple will be able to exempt $10.9 million from federal estate and gift taxes. The annual gift exclusion remains the same at $14,000.
Maryland laws have been modified to provide for a more generous estate tax exemption, which will certainly reduce the sting that many feel when they are forced to pay hefty estate taxes from a loved one’s estate.
So how does the Maryland tax compare with the federal version?
As of 2016, Maryland currently imposes an estate tax on taxable estates in excess of $2 million (the state exemption amount). Legislation passed in 2014 instituted a phased-in increase to the annual exemptions in an attempt to conform the Maryland estate tax exemption amount to the value of the credit under the federal estate tax. The increase in the amount that can be excluded for Maryland estate tax purposes is phased over five years and is equal to (1) $1.5 million for a decedent dying in calendar year 2015; (2) $2.0 million for a decedent dying in calendar year 2016; (3) $3.0 million for a decedent dying in calendar year 2017; (4) $4.0 million for a decedent dying in calendar year 2018; and (5) the amount excluded under the federal estate tax for a decedent dying on or after January 1, 2019.
It is presumed that in 2019, the federal exemption amount will be just shy of $6 million, but we will not know for sure until we are closer to 2019.
If you would like to consult with me concerning any Maryland probate matter, please contact me at email@example.com or 301-563-6685.