Annapolis Estate Tax Attorneys

A comprehensive estate plan should not only address how you want your property distributed after your death, but it should also consider the tax implications of your options.

At the Law Offices of Merrill, Cruttenden & Collinson, P.A., our Annapolis estate tax lawyers have a number of ways that we can help clients approach estate tax issues. It is important that, at the minimum, the following three tax issues are addressed in your plan: federal estate tax, state estate tax considerations and the potential impact of the Maryland inheritance tax.

Federal Estate Tax

The current federal estate tax exemption for 2012 is $5 million per person, or $10 million per couple. This area of federal law remains uncertain. These exemptions are set to expire at the end of 2012, but it is unclear if Congress will act to extend these exemption limits or change the limits for future years.

In addition, the tax rate for estates with assets that exceed the exemption limit is currently set at 35 percent. Again, it is uncertain as to whether Congress will change this tax rate.

Just because the law is uncertain, however, does not mean that you should wait to talk with an estate attorney. Not only are there tools available to deal with and manage this uncertainty, your estate plan can only benefit you once it is in place. In the event something should happen to you before a law change, your family may be adversely impacted because there is no plan in place.

State Estate Tax

If your assets are all located in Maryland, your estate plan will need to take into account the Maryland estate tax. If, however, you have a cabin, vacation home or other property located in another state, your plan must take the estate tax of the state where your other property is located into account as well. We will help you determine the tax implications of all the property in your estate.

Maryland Inheritance Tax

In Maryland, the inheritance tax is not a tax on the estate and has nothing to do with the size of the estate. The beneficiary or person who receives your property after you pass away pays the Maryland inheritance tax. In Maryland, everyone who is not a son, daughter, grandchild, step-child, sibling, parent, step-parent or spouse is subject to a 10 percent inheritance tax. This means that in certain circumstances if your estate plan includes a gift to your niece, nephew, friends or domestic partners the beneficiary will need to pay the inheritance tax.

Legal Tools Available to Reduce or Eliminate Your Estate Tax Liability

There are several legal tools and strategies available for clients who have an estate where the assets exceed the exemption value. These tools can also be especially beneficial for those estates that are right on the cusp of being over the exemption limit.

• Credit shelter/marital trust — This tool incorporates a "formula" clause in a Will. This formula directs that some portion of the estate will be included in a bypass trust, which is also sometimes referred to as a credit shelter trust. The bypass trust assets escape estate tax at the second death. The balance of the estate is directed to a marital trust, which assets may or may not be subject to federal and/or state estate tax at the second death. This tool is also sometimes referred to as "A/B Trusts."
• Disclaimer planning — The use of this clause allows the surviving spouse to disclaim a portion of the estate so that the total value of the survivor's estate is less than the exemption limit. This tool has an impact on both the planning stage, as well as the probate administration.

For additional information on this topic, please review our frequently asked questions section of our site regarding Maryland estate tax and how to reduce or eliminate your estate tax.

Contact Anne Arundel County Attorneys for Experienced Wills and Trusts Representation and Advice

If you are facing estate planning issues and have questions about estate tax issues, we can answer your questions and help you seek favorable results. Please contact our Maryland estate tax law firm or call our office at 410-881-0355 to speak with an experienced lawyer. We offer our estate planning and business law clients free initial consultations.