How Do I Avoid Inheritance Tax in Maryland?

Inheritance taxes are rarely pleasant surprises—especially in Maryland. In Maryland, even modest inheritances can trigger obligations if the beneficiary is not an exempt relative. The state remains one of the few that still imposes such a tax. So, the question comes up often: how do I avoid inheritance tax in Maryland?

First, it should be noted that the existing laws cannot be ignored or bypassed. However, what can be done is something more strategic—adjusting the estate structure in a smart way so that the eventual beneficiaries are not met with unexpected taxation bills.

Legal Ways to Minimize Inheritance Tax in Maryland

A Maryland inheritance tax accountant would recommend early planning. The tools routinely used to lower or completely eliminate such tax can be outlined as below:

• Gift While Alive: Maryland does not apply an inheritance tax to gifts given during the lifetime. Assets transferred early to a niece or cousin, for instance, are not taxed when the estate is settled.
• Create a Trust: Assets held in specific types of trusts might pass outside the probate process. The estate might be structured in a way that prevents inheritance tax for non-exempt heirs with proper drafting.
• Name Exempt Heirs as Beneficiaries: Children, parents, spouses, siblings, and grandchildren are not subject to inheritance tax. Where it makes sense, assets can be passed to them directly instead of to other relatives.
• Charitable Transfers: It should be noted that property left to charitable organizations is not taxed. If part of the estate is intended for giving, it can reduce the total taxable amount and support a cause.

No Threshold, No Exemption (for Some)

Instead of the federal estate tax, which only influences estates exceeding the federal inheritance tax threshold, Maryland inheritance tax laws impose a flat 10% on any amount received by a non-exempt heir. There is no floor nor minimum value exemption. Whether $200 or $200,000, this tax still applies.

That’s why strategies are not about avoiding large windfalls—they’re about addressing any value that would be taxed unnecessarily.

Do I Still Need a Maryland Estate Tax Accountant?

In many cases, yes. The inheritance tax in Maryland is just one part of a broader estate picture. There’s also the Maryland estate tax. It is separate from inheritance tax and applied to the estate’s total value before distributions. Coordination between the two tax layers is vital. Watter CPA is ready to present professional assistance for full compliance.