Maryland Estate Tax: Big Changes Could Be Coming—Here’s What You Need to Know
Estate planning often gets pushed to the back burner, but if you're a Maryland resident, now is the time to move it to the top of your list. Governor Wes Moore’s recently proposed budget includes some significant changes that could impact estate planning for many Maryland residents.
Here’s what’s being proposed—and why it matters:
A Potential Win: Eliminating the Collateral Inheritance Tax
Let’s start with the good news. The proposed budget would eliminate the collateral inheritance tax. This is a 10% tax that currently applies to inheritances distributed to anyone who isn’t a lineal descendant—like a friend, niece, or cousin. The proposal would also do away with this tax on probate and non-probate transfers, as well as gifts made within two years of someone’s passing.
If this part of the budget is approved, it could be a welcome relief for many Maryland residents looking to leave something to loved ones outside their immediate family.
The Bigger Concern: Lower Estate Tax Exemption
Now for the more pressing (and concerning) part of the proposed changes: Governor Moore’s budget calls for lowering Maryland’s estate tax exemption.
Currently, individuals in Maryland are exempt from estate tax if their estate is valued at $5 million or less. Married couples can combine their exemptions for a total of $10 million. Under the new proposal, however, the exemption would drop to $2 million per individual and $4 million per married couple—and this change could take effect as soon as July 2025.
If you’re thinking, “That’s a pretty big difference,” you’re right. For individuals with estates valued between $2 million and $5 million, this would mean facing estate tax liability for the first time.
What Does This Mean for You?
If these changes are approved, many Maryland residents will need to revisit their estate plans. The reduced exemption could mean higher taxes for estates that were previously in the clear, which makes it critical to plan ahead.
For example, let’s say your estate is worth $4 million. Under current law, you wouldn’t owe any Maryland estate tax. But if the proposed changes go into effect, anything over $2 million would be taxed at a progressive rate. Without proper planning, changes in the law (or even changes in your assets) could leave your family with an unexpected tax bill.
Why It’s Important to Act Now
Even though these changes aren’t law yet, they’re a strong reminder of how quickly estate tax laws can shift. If your estate is anywhere near the proposed $2 million exemption threshold, now is the time to start planning.
Some strategies to mitigate the impact of a lower exemption could include:
Gifting assets during your lifetime to reduce the size of your estate.
Setting up trusts to provide tax advantages and protect your assets.
Ensuring you’re taking full advantage of the portability rules for married couples.
By starting the conversation now, you’ll be prepared no matter what happens in Annapolis.
How Cedar Counsel Can Help
Estate planning isn’t just about saving on taxes. It’s about ensuring your loved ones are taken care of, your wishes are honored, and your legacy is preserved.
I’ve helped families plan for everything from reducing taxes to protecting family businesses to leaving gifts for causes they care about. Every plan is unique, and it’s never too early—or too late—to get started.
If you’ve been putting off estate planning or wondering if your current plan still works for you, now’s the time to take action. Let’s talk about how to safeguard your assets, no matter what changes come your way. Schedule a complimentary consultation today.
This article is a service of Cedar Counsel. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.