how much can you transfer free of maryland estate taxes
TRANSCRIPT
HOW MUCH CAN YOU TRANSFER FREE OF
MARYLAND ESTATE TAXES?
“Accumulating wealth can be challenging, and you may breathe a sigh of relief when you find that you will be able to make things easier for your loved ones after you are gone. This is well and good, but you do have to be aware of the potential impact of estate taxes.”
Colleen Sinclair Prosser Annapolis, Maryland Estate Planning Attorney
How Much Can You Transfer Free of Estate Taxes? www.sinclairprosserlaw.com 2
Accumulating wealth can be challenging, and you may breathe a sigh of relief
when you find that you will be able to make things easier for your loved ones
after you are gone. This is well and good, but you do have to be aware of the
potential impact of estate taxes. We will look at the taxes that may be a factor
for you in this paper.
FEDERAL ESTATE TAX
There is a federal estate tax in place, and it has been around since 1916. Every
estate is not subject to the tax, because there is a credit or exclusion that allows
you to transfer a certain amount of property before the tax would kick in.
How Much Can You Transfer Free of Estate Taxes? www.sinclairprosserlaw.com 3
There was a base exclusion of $5 million installed for the 2011 calendar year, and
after the American Taxpayer Relief Act of 2012 was passed, this exclusion was
made permanent. However, there have been ongoing adjustments each year
since 2011 to account for inflation.
After a series of adjustments, the exact amount of the federal estate tax
exclusion in 2015 is $5.43 million. You are probably going to see a somewhat
higher figure each year as inflation adjustments are added.
The maximum rate of the federal estate tax is 40 percent at the present time, so
we are talking about an attention-getting figure that can significantly impact your
financial legacy.
FEDERAL GIFT TAX
A logical response to the estate tax
would be gift giving while you are
alive. People used to be able to do
this for a few years after the original
enactment of the death tax, but a gift
tax was installed to close this
loophole.
The gift tax and the estate tax are unified, and this means that the $5.43 million
exclusion is a unified exclusion. It includes gifts that you give while you are living
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along with the value of your estate. In other words, if you gave $5.43 million in
tax-free gifts while you are living using your unified exclusion, your available
exclusion would be exhausted. All of your estate would be subject to the estate
tax.
The estate tax exclusion is portable between spouses. This means that a
surviving spouse could use his or her own exclusion and the exclusion that was
afforded to his or her deceased spouse.
While we are on the subject of spouses, there is an unlimited marital transfer tax
deduction. Unlimited assets can be transferred to your spouse while you are
living or after you pass away free of federal transfer taxes. A caveat to this
statement would be that your spouse must be an American citizen to take
advantage of the unlimited marital transfer tax deduction.
STATE-LEVEL ESTATE TAX
There are a number of states in the union that have state-level estate taxes. We
practice law in the state of Maryland, and there is a state-level estate tax in our
state. At the present time, the Maryland state estate tax exclusion is $1.5 million
in 2015 and is set to increase over the next several years. As a result, you could
be exempt from the federal estate tax, but exposed to the Maryland state estate
tax.
We should point out the fact that there is a marital deduction on the state level
How Much Can You Transfer Free of Estate Taxes? www.sinclairprosserlaw.com 5
as well. You can transfer unlimited assets to your spouse without incurring any
Maryland state estate tax liability.
MARYLAND STATE INHERITANCE TAX
An inheritance tax and an estate
tax are two different things. An
estate tax is levied on the
entirety of the taxable portion of
an estate, and an inheritance tax
is levied on transfers to each
individual inheritor that is not
exempt.
There is no federal inheritance
tax, but there are six states that have state-level inheritance taxes Maryland is
one of them, so you should be aware of this tax when you are planning your
estate as a Maryland resident.
SUMMARY
On the federal level, you can transfer $5.43 million tax-free using the federal
estate tax exclusion or credit. Maryland has its own state-level estate tax, and
that exclusion is $1.5 million in 2015.
How Much Can You Transfer Free of Estate Taxes? www.sinclairprosserlaw.com 6
There are legal steps that you can take to mitigate the burden if you are exposed
to estate taxes. To explore your options, schedule a consultation with a licensed
estate planning attorney.
REFERENCES
Forbes
http://www.forbes.com/sites/janetnovack/2012/10/14/the-forbes-guide-to-
estate-planning/
IRS
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estate-and-
Gift-Taxes
Collaborative Research Project
http://lobby.la.psu.edu/027_Estate_Tax/frameset_estate.html
How Much Can You Transfer Free of Estate Taxes? www.sinclairprosserlaw.com 7
About the Author
Colleen Sinclair Prosser
Currently the owner and manager of SinclairProsser Law, LLC, Colleen steers her firm with both a guiding hand and direct
involvement with the clients, bringing to the table a wealth of Estate Planning experience from many years spent at the helm
of a busy law practice. Colleen is currently serving on the Board of Trustees for By Their Side, Lifelong Advocates for
Marylanders with Developmental Disabilities. She formerly served on the Board
of Governors of the American Academy of Estate Planning Attorneys in the past.
EXPERIENCE An established member of the American Academy of Estate Planning Attorneys, Colleen offers years of experience in estate preservation and transfer. A strong
proponent of the living trust, she also focuses on wills, powers of attorney, living wills, probate, trust administration, prenuptial agreements, nursing home
planning, and special needs planning. She strongly endorses long-term care insurance and, in certain cases, life insurance and some annuities as valuable estate preservation vehicles, and strives to assure the compatibility of her clients’
estate plan and financial plan. Sensitive to the challenges presented by lifestyle and circumstance, Colleen addresses each situation with personal attention,
wisdom, and skill.
SinclairProsser Law, LLC www.sinclairprosserlaw.com
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