The Maryland General Assembly passed multiple bills this year that have significant effects on estate planning. Here is a breakdown of two of the bigger bills and how they could affect you.
Amendment to the State Estate Tax
Beginning in 2019, the new cap for exemptions from the estate tax will be $5 million for individuals and $10 million for married couples. Previously, Maryland had followed the federal estate tax law, which formerly had applied to estates in excess of $5.6 million. However, following the Tax Cuts and Jobs act of 2017, the federal estate tax now applies only to estates in excess of $11.2 million. Maryland has chosen to decouple from the federal law and set its own limits to prevent millions in losses to the state.
How Does This Affect You?
This amendment will only affect those who are above the exemption limit, but it defines whether you are going to pay a state tax on the estate or not. Anyone creating a will or trust will need to determine if the exemption applies to them and plan accordingly.
HB0198: Perpetual Conservation Easement – Exemption
HB0198 created an exemption for the Maryland inheritance tax which applies to inherited farmland. Under this exemption, the inheritance tax doesn’t apply to niece or nephew of the decedent if the land in question is under a farmland easement and the property continues to be used for farm purposes. However, if the land is no longer used for farming once it’s transferred, then the inheritance tax of 10% on the real value of the property will apply. The amendment goes into effect on July 1, 2018.
How Does This Bill Affect You?
This bill is unlikely to affect the majority of beneficiaries around the state, but it does affect those farmers or landowners who wish to pass farmland on to relatives who aren’t their own children or grandchildren. This expands the options for farmers to feasibly pass on their land to other family members and maintain farms around the state, which has been a growing priority for many years.