Starting in 2015, Maryland will gradually raise its $1 million estate tax exemption until it matches the federal estate tax exemption, which is estimated to be $6 million in 2019.
Below Mike Mandish, Principal at SC&H Financial Advisors, Inc., provides additional insights into this change in the tax exemption.
The interesting part of this estate tax bill is that it does not impact everyone, only those with assets over $1 million. Even those taxpayers, with the proper estate plan in place, can minimize or even eliminate the tax. But, it did produce income to the State of Maryland and the question is where will they make up for this?
The biggest issue that I have is not with the exemption being increased, but with the high tax rate of 16 percent that goes with it. I think the legislators would have done better to put this tax law change on the back burner and focus their efforts towards reducing the income tax, which impacts everyone. How many conversations do you hear with Maryland citizens complaining about estate taxes vs. income taxes?
Furthermore, there used to be a 1 percent inheritance tax, which produced a significant amount of revenue, but was at such a low rate of tax that nobody complained too much about it particularly since it was coming from “found” money. If this estate tax had a low rate of tax, it probably would not have received the attention that it did.
The main intent of this bill is to keep the higher-net-worth folks from leaving Maryland. However, the income taxes are still better in Florida, which is none, than in Maryland and that is a tax savings every year. The estate tax is only paid once, hence the reason I believe the focus should have been on the income tax.
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