Maryland Estate & Inheritance Tax Planning
Last updated: 11 Nov 2025 • Author: Alexander Foelsche CPA (US), WP (DE), RE (CH)
Maryland Estate Tax — Planning Guide
Maryland imposes a stand-alone estate tax administered by the Comptroller of Maryland, alongside a separate inheritance tax (Registers of Wills). Effective planning captures the $5,000,000 state exclusion, leverages Maryland DSUE (portability) or a Maryland-only QTIP, coordinates with the inheritance tax, and manages situs, valuation, and liquidity.
1) Married couples — capture the Maryland exclusion
Maryland DSUE (portability)
- File a timely MET-1 to transfer the unused exclusion (deceased spousal unused exclusion amount) to the survivor.
- Attach a copy of the first spouse’s federal Form 706 showing a valid federal portability election.
- Useful when the couple’s net worth is expected to grow beyond $5 million.
Credit shelter / bypass trust (state-sized)
- Fund up to the Maryland exclusion at the first death to lock in the predeceased spouse’s state amount.
- Maintain federal-style schedules for valuation and basis consistency.
- Hybrid plans often combine a partial bypass trust with DSUE preservation.
2) Maryland-only QTIP (deferral)
Election & documentation
- Elect the QTIP on MET-1 Schedule D; attach an asset list and election statement.
- Trust must meet income-to-spouse requirements; keep supporting trust language.
- Property will be included in the survivor’s Maryland taxable estate at revaluation.
When to use QTIP vs. bypass
- Choose QTIP when liquidity and income security for the survivor are priorities.
- Use bypass when appreciation or control is the primary goal.
- Coordinate tax-allocation clauses and federal elections carefully.
3) Coordinate with the inheritance tax
Beneficiary classes & exemptions
- Spouse, lineal heirs, and siblings are typically exempt; other recipients face a 10 % inheritance tax.
- Draft wills/trusts with tax-allocation clauses aligned to Maryland rules.
Cash-flow & credits
- Inheritance tax paid by the estate can offset Maryland estate tax; retain payment receipts.
- Coordinate timing so inheritance-tax filings and MET-1 credit computation align.
4) Nonresident & multi-state planning
Situs management
- Nonresidents are taxed on Maryland-situs real and tangible property; most intangibles are excluded unless tied to a business situs.
- Maintain deeds, titles, and storage or insurance evidence to prove situs.
Entity & title considerations
- Entity ownership does not automatically avoid situs; watch for “look-through” rules.
- Coordinate ancillary probate and title clearances for Maryland real property.
5) Lifetime gifting & basis trade-offs
No Maryland gift tax
- Lifetime gifts can reduce a future Maryland estate.
- Weigh state-tax savings against the loss of step-up in basis.
- Consider irrevocable trusts to shift growth out of the estate while retaining governance flexibility.
Beneficiary designations
- Align POD/TOD/retirement designations with estate-tax strategy.
- Check inheritance-tax exposure for gifts or transfers to non-exempt recipients.
6) Deductions, valuation & liquidity
Substantiation
- Executor fees, attorney/CPA fees, and debts require invoices and proof of payment.
- Use qualified local appraisers for Maryland real estate and tangibles; coordinate with probate inventories.
Timing & payment
- Maryland return and payment are due within 9 months of death.
- Extension to file does not extend time to pay; consider estimated payments.
- Plan liquidity (insurance, credit lines, staged sales) to avoid forced dispositions.
Advisor checklist
During lifetime
- Model DSUE preservation vs. bypass vs. QTIP combinations.
- Align titling and beneficiary designations with chosen structure.
- Use gifts strategically; document basis and valuation.
- For nonresidents, maintain clear situs records for Maryland assets.
At death
- Verify Maryland exclusion and any DSUE or QTIP elections.
- Coordinate inheritance-tax filings with the Register of Wills.
- Mark the 9-month payment deadline; file MET-1E if an extension is needed.
- Keep attachments organized (appraisals, invoices, court orders, proofs of payment).
References
- Comptroller of Maryland — MET-1 (Estate Tax Return) & Instructions: DSUE/portability and Maryland-only QTIP.
- Comptroller of Maryland — MET-1E (Extension; DSUE worksheet).
- Registers of Wills — Maryland inheritance-tax procedures and exemptions.
- IRS Form 706 & Instructions — federal valuation and deduction framework.