Maryland is the only state that imposes both a state estate tax and a separate inheritance tax, so the same estate can face two different Maryland taxes depending on its size and who inherits. The estate tax exemption is 5 million dollars, and the inheritance tax is 10 percent for beneficiaries who are not close relatives.
Whether you live in Baltimore, the DC suburbs, or the Eastern Shore, Maryland's dual tax system means the relationship between you and your beneficiaries can matter as much as the size of your estate. This guide breaks down both taxes and the paperwork that follows a death.
Maryland's Estate Tax and Inheritance Tax
Maryland's estate tax exemption is 5 million dollars and has not been indexed for inflation since 2019, according to a review of Maryland estate tax rules. Estates above that amount pay a progressive rate that can reach 16 percent on the largest estates. Separately, Maryland's inheritance tax applies at 10 percent to property left to beneficiaries who are not a spouse, child, grandchild, parent, grandparent, sibling, stepchild, or stepparent. That means a gift to a niece, nephew, friend, or unrelated caregiver can trigger the inheritance tax even when the overall estate is nowhere near the 5 million dollar estate tax threshold. Because Maryland is the only state layering both taxes, out-of-state advice often misses this detail entirely.
Maryland's Small Estate Procedure
According to the Maryland Register of Wills, an estate qualifies as a small estate if the decedent's probate assets total 50,000 dollars or less, or 100,000 dollars or less if a surviving spouse is the sole heir or legatee. Only probate assets (property titled solely in the decedent's name) count toward this threshold; assets that pass by beneficiary designation or joint ownership do not. Small estates avoid many of the fees and formalities of regular estate administration, which can meaningfully shorten the timeline for a modest estate.
What Happens Without a Will in Maryland
Dying intestate in Maryland means the Orphans' Court applies a fixed statutory formula. A surviving spouse generally shares the estate with children rather than inheriting everything outright, with the exact split depending on whether the children are also the spouse's children. Unmarried individuals without children typically see the estate pass to parents, then siblings, then more distant relatives. None of this reflects a couple's or family's actual wishes, which is why a will remains the simplest fix.
How to Transfer an Estate in Maryland
Transferring an estate starts with filing the original will with the Register of Wills in the county where the decedent lived, then petitioning the Orphans' Court to appoint a personal representative. The representative inventories and appraises assets, pays debts and any Maryland inheritance tax owed, and distributes what remains to beneficiaries under the will or under intestacy. writing your own will with the right executor named from the start avoids delays caused by family disagreement over who should serve.
Wills, Trusts, and Reducing the Inheritance Tax
A revocable living trust avoids the Maryland probate process for assets held inside it, but it does not by itself avoid the inheritance tax, since that tax is based on the beneficiary's relationship to the decedent, not on whether the asset passed through probate. Understanding the difference between a will and a trust matters here specifically because some families use trusts, life insurance, or lifetime gifting to plan around the 10 percent inheritance tax for non-exempt beneficiaries, rather than assuming a trust solves the tax problem automatically.
A Worked Example: A Gift to a Close Friend
Say a Maryland resident wants to leave 40,000 dollars to a longtime friend who is not a blood relative. That gift is subject to the 10 percent Maryland inheritance tax, meaning the friend receives 36,000 dollars after tax, even though the overall estate is far below the 5 million dollar estate tax exemption. Naming the same amount to a child instead would trigger no inheritance tax at all. Knowing this in advance lets a person adjust the gift, cover the tax with a separate life insurance payout, or accept the reduced amount as part of a deliberate choice.
Common Mistakes to Avoid
- Assuming Maryland only has one type of death tax
- Leaving a gift to a friend, niece, or nephew without planning for the 10 percent inheritance tax
- Believing a trust removes the inheritance tax obligation
- Missing the small estate procedure when the estate qualifies, adding unnecessary cost
- Failing to update the will after a divorce, remarriage, or new grandchild
FastWill's online will package builds a Maryland-ready will with the executor and guardian sections clearly laid out, and a Maryland attorney can help structure gifts to non-exempt beneficiaries around the inheritance tax. Compare plans and pricing to see what is included.
Frequently Asked Questions
Does Maryland have both an estate tax and an inheritance tax?
Yes. Maryland is the only state that imposes both. The estate tax exemption is 5 million dollars, and the inheritance tax is 10 percent for beneficiaries outside the exempt close-relative categories.
Who is exempt from Maryland's inheritance tax?
A spouse, child, grandchild, parent, grandparent, sibling, stepchild, and stepparent are all exempt from the 10 percent Maryland inheritance tax.
What qualifies as a small estate in Maryland?
Probate assets of 50,000 dollars or less generally, or 100,000 dollars or less if a surviving spouse is the sole heir or legatee, per the Maryland Register of Wills.
Does a trust avoid Maryland's inheritance tax?
No. A trust can avoid probate for assets held inside it, but the inheritance tax is based on the beneficiary's relationship to the decedent, not on whether probate was involved.
What happens if a Maryland resident dies without a will?
The Orphans' Court applies Maryland's intestacy formula, generally splitting the estate between a surviving spouse and children rather than following the family's actual wishes.
