Maryland Inheritance Tax: Who Pays and Who’s Exempt
Maryland is one of only a handful of states that imposes an inheritance tax and one of the very few with both an inheritance tax and an estate tax. If you’re inheriting property from a Maryland resident, or planning your own estate, understanding how this tax works can save your family real money.
The good news up front: most people who inherit in Maryland pay nothing, because the closest family members are exempt. The tax mainly affects more distant relatives and friends.
What Is the Maryland Inheritance Tax?
The Maryland inheritance tax is a 10% tax on property that passes from a deceased person to certain beneficiaries. It’s collected by the Register of Wills in the county where the estate is administered, and it applies based on the relationship between the deceased and the person inheriting, not on the overall size of the estate.
That relationship-based structure is the key to understanding the whole tax.
Who Is Exempt?
As of the date of this publication, Maryland law exempts transfers to the deceased person’s closest family, including:
- The surviving spouse
- Children, grandchildren, and other lineal descendants (and their spouses)
- Parents and grandparents
- Siblings
- Stepchildren and stepparents
If everything in an estate passes to people in these categories, which is true of most family estates, no inheritance tax is due at all.
Who Pays the 10%?
The tax falls on beneficiaries outside the exempt categories. The inheritance tax is a common political football and is subject to change from year to year, so it’s essential that you discuss this with an attorney so that you are not relying on outdated information. The most common examples we see in practice:
- Nieces and nephews
- Aunts, uncles, and cousins
- Friends and unmarried partners (with limited exceptions)
- Most unrelated individuals and organizations (though qualifying charities are exempt)
This surprises a lot of people. Leaving $100,000 to your niece means roughly $10,000 goes to the Register of Wills unless your estate plan addresses it. That is true even if the asset is illiquid, meaning that it’s difficult to turn into cash quickly, such as unique collectibles or a home that the recipient is not planning on selling.
Inheritance Tax vs. Estate Tax: What’s the Difference?
These two taxes are constantly confused, so here’s the distinction:
| Inheritance Tax | Estate Tax | |
|---|---|---|
| Who pays | The beneficiary (based on relationship) | The estate itself (based on size) |
| Rate | 10% on non-exempt transfers | Graduated, up to 16% (Maryland) |
| Applies when | A non-exempt person inherits | The estate exceeds Maryland’s exemption threshold |
Most Maryland families will never owe estate tax, because the exemption threshold is in the millions. The inheritance tax, by contrast, can apply to estates of any size. What matters is who inherits.
Does the Inheritance Tax Apply to Non-Probate Assets?
Often, yes. The tax can reach property passing by will, by intestacy, through jointly owned property, and through certain trusts and beneficiary designations. Simply avoiding probate does not automatically avoid the inheritance tax, which is another reason cookie-cutter online estate plans can mislead Maryland residents.
Planning Around the Inheritance Tax
If you intend to leave assets to nieces, nephews, friends, or other non-exempt beneficiaries, there are legitimate planning strategies worth discussing:
- Lifetime gifting. Gifts made well before death generally avoid the inheritance tax (gifts made within a short window before death can still be taxed).
- Directing who bears the tax. Your will or trust can specify whether the tax comes out of the beneficiary’s share or the estate’s residue — a drafting detail with real consequences.
- Restructuring bequests. Sometimes rearranging which assets go to which people reduces the total tax burden.
- Charitable planning. Qualifying charitable bequests are exempt.
These decisions belong in a thoughtfully drafted will or trust — not left to default rules.
What Personal Representatives Need to Know
If you’re administering an estate with non-exempt beneficiaries, the inheritance tax is your responsibility to calculate, report, and pay through the Register of Wills before distribution. It’s one of the trickier parts of serving as a personal representative in Maryland, and mistakes can create personal liability. It also interacts with the probate timeline. See our guide to how long probate takes in Maryland.
Frequently Asked Questions
Do I pay Maryland inheritance tax on money from a parent?
No. Children and other lineal descendants are exempt.
Does my domestic partner owe inheritance tax?
Possibly. Exemptions for unmarried partners are limited and fact-specific. This is an area where planning matters enormously; talk to an attorney about your specific situation. Consider a Registered Domestic Partnership as one option.
Is there a minimum amount before the tax applies?
Small allowances exist, but as a rule of thumb the 10% applies to non-exempt transfers regardless of estate size.
Do out-of-state beneficiaries still pay?
Yes. The tax depends on the deceased’s Maryland property and the relationship, not where the beneficiary lives.
Planning your estate or administering one with inheritance tax questions? The Law Office of Maxwell White serves Frederick and the entire region. Call (443) 647-9009 or schedule a free consultation.