2018 Federal and Maryland Legislation Changes Regarding Estate and Gift Tax

by Pessin Katz Law, P.A.

Pessin Katz Law, P.A.

An abundance of tax legislation was signed into law in the final days of 2017. In terms of estate and gift tax, here is what individuals need to keep in mind:

Under the new law, which took effect on January 1, 2018, the following changes occurred on the Federal level:

  • Federal estate tax, gift tax, and generation-skipping transfer tax exemption amounts increased from $5,490,000 per person to $11,200,000 per person.
  • Married couples now have an exemption of $22,400,000.
  • These exemption amounts are scheduled to increase with the rate of inflation through the end of 2025.
  • On January 1, 2026, the federal estate tax, gift tax, and generation-skipping transfer tax exemption amounts will revert back to the 2017 amounts, adjusted to inflation levels.
  • The annual exclusion gift amount an individual may gift to another without incurring any gift tax consequences has increased from $14,000 to $15,000 per donee.
  • A married couple may make annual exclusion gifts of $30,000 to as many individuals as they choose.

While many changes are happening at the federal level, it is important to understand the estate tax laws for the state in which you reside. In Maryland, the following changes occurred:

  • If you die in 2018, with an estate with a gross value of more than $4 million, an estate tax return must be filed with the Comptroller of Maryland, and estate tax will be due.
  • Maryland legislature regarding inheritance tax remained intact, which imposes an inheritance tax on certain beneficiaries. The imposition of inheritance tax is dependent on the relationship of the person to which you are leaving money.

You may be thinking – how do these changes apply to me? Well, as a result of the change in the federal exemptions, individuals should consider the following:

  • Making gifts in order to bring his or her estate back to or below the Maryland exemption amount of $4 million. For example, an unmarried person with a $6 million estate could utilize the increased federal exemption to make gifts, free of tax, to bring his or her estate back to or below $4 million. This would avoid that individual’s estate from being subject to Maryland estate tax.
  • Governor Hogan recently announced an intent to freeze the Maryland estate tax exemption at or close to $5 million instead of increasing the exemption to match the federal exemption amount in 2019. This makes it even more imperative for individuals to plan accordingly for maximum tax savings.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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