The Maryland estate tax exemption amount remains at $1,000,000 in 2009. What this means in plain English is that you can give up to a total of $1,000,000 after you die to those you love (besides your spouse or your favorite charities) without incurring Maryland estate taxes. If you give more than $1,000,000, some of your gift will be spent on paying Maryland estate taxes at a rate of approximately 16%.
For example if you have an estate worth $2,000,000 to give to your three kids, the first $1,000,000 goes to them estate tax free. The next $1,000,000 incurs an estate tax of approximately $100,000 reducing the total gift from $2,000,000 to $1,900,000.
The Federal estate tax exemption has increased to $3,500,000 in 2009. Again in plain English, you can give up to $3.5 million after you die to those you love (besides your spouse and favorite charities) without your estate owing federal estate taxes. Anything over that is taxed at at 45%. For example, a total gift to your children of $4,000,000 would be exposed to both Maryland estate taxes of approximately 16% of any amount over $1,000,000 and federal estate taxes on the amount greater than $3,500,000.
There are legal well-accepted ways to reduce estate taxes. If you are in the fortunate position of having an estate as described above, I urge you to consult with an estate lawyer to properly plan your posthumous gifts.
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