Decoding Maryland Inheritance Law: Your Comprehensive Guide to Understanding How Inheritance Works in the State
When a person dies in Maryland, their property becomes subject to Maryland inheritance law. Understanding Maryland inheritance law and how it impacts property distribution is essential to ensure your wishes are fulfilled after your death. Our Maryland estate planning attorney provides this comprehensive guide to understanding how inheritance works in our state to help you decode Maryland inheritance law.
Factors That Influence Estate Division
The most significant factor influencing estate division is whether you have a Will when you die. If you have a Will, your Will dictates how your property is distributed. You control who inherits from your estate and what they receive. Without a Will, Maryland intestate laws determine the estate division.
Another factor that influences estate division is ownership. The only property subject to probate is property owned by the deceased. Therefore, joint ownership can impact probate. Only the deceased share of the jointly owned property is subject to probate. Therefore, if you own a one-third interest in real estate, only your one-third interest passes through your estate. The other two-thirds of interest remains vested with the current owners.
What Happens to Property Subject to Probate?
The role of probate is to validate the authenticity of a person’s Will and oversee the administration of the estate. The personal representative (executor) has numerous duties including:
Notify heirs and creditors
Secure property and prepare an inventory and appraisal
Pay or object to debts and claims
Distribute assets to heirs according to the Will or intestate succession
Prepare income tax returns and/or estate tax returns
Prepare and file a final accounting
The personal representative is responsible for ensuring the property subject to probate is distributed to the correct heirs. However, not all property is subject to probate.
What Are Examples of Property That Pass Outside of the Probate Process?
Even though you have a Will, some property passes outside of the probate process. Examples of property not subject to probate include, but are not limited to:
Jointly owned property with right of survivorship
Life insurance
Assets titled in a trust
Property with a named beneficiary, such as retirement accounts and pensions
Bank accounts with a POD (paid on death) or TOD (transfer on death) designation
The above property might be included in the estate inventory because the assets could be subject to estate or inheritance tax even though they are not probate assets for distribution purposes. Probate assets include all other property owned by the deceased, including vehicles, real estate, business interests, personal possessions, and liquid assets.
Overview of Maryland Intestacy Law
Intestate refers to dying without a Will. Maryland intestacy law applies if the deceased does not have a valid Will. Maryland intestate law is codified in the Maryland Code beginning with Estates and Trusts §3-101.
Dying Without a Will in Maryland
When you die without a Will, state law requires that the personal representative appointed by the court distributes your property to heirs in order as prescribed by intestate succession. Your heirs include close relatives. It does not include other relatives unless you die without any close family members. Furthermore, intestate succession does not include charities or friends. Therefore, having a valid Will is the only way to control who receives your property after your death.
Which Assets Pass by Intestate Succession?
All assets owned by the decedent that do not pass outside of probate go through intestate succession. Therefore, all your property will pass according to Maryland’s intestate laws if you do not have a Will. The only exceptions would be if you have jointly owned property with the right of survivorship or assets with a beneficiary named, such as life insurance and some financial accounts.
Who Gets What in Maryland? Estate Division Under Maryland Laws of Intestacy
Maryland’s intestate laws come into effect when someone dies without a Will. The law determines who inherits the deceased person’s property and the breakdown of the inheritances. Let’s take a closer look at the intestate hierarchy of beneficiaries according to Maryland intestate law.
Intestate Estates With a Surviving Spouse
A surviving spouse inherits the entire estate when the deceased has no surviving children or parents. However, if the deceased has children, the surviving spouse and the children have a share in the estate.
The surviving spouse receives one-half of the estate if the surviving children are minors. If all children are over 18 years old, the spouse receives the first $15,000 plus one-half of the estate. In either case, the children split the remaining estate equally.
If there are no surviving children but a surviving parent, the spouse receives the first $15,000 plus one-half of the estate. The parent(s) receives the remaining estate.
Children's Shares in Maryland - Intestate Estates Without Surviving Spouse
If there is no surviving spouse, the children split the estate equally. Children include biological children and adopted children. If a child predeceases their parent and has children, that child’s share is divided among their children.
Intestate Estates Without a Surviving Spouse or Children
A surviving parent inherits the entire estate when there is no surviving spouse, children, or grandchildren. If both parents are living, they share the estate equally.
If a person is not survived by their parents, spouse, or children, then the estate is divided among the person’s siblings. A predeceased sibling’s share is given to their children. In the event the person has no living siblings, nieces, or nephews, Maryland intestate law directs the estate to be divided among more distant relatives in a specific order of priority.
Does Maryland Have an Inheritance Tax or Estate Tax?
Maryland has an inheritance tax and an estate tax.
Maryland’s inheritance tax is collected by the Register of Wills in the county where the deceased lived or owned property. The inheritance tax is paid on property that passes through a Will or the intestate laws of succession. The tax is also levied on property that passes through a deed, trust, joint ownership, or other means of transfer. The inheritance tax rate for decedents who died on or after July 1, 2000, is 10% on property passing to individuals who are not the deceased:
Spouse
Parent
Child or other lineal descendent
Spouse of a child or other lineal descendent
Grandparent
Stepchild or stepparent
Siblings
Corporation with only the above people as stockholders
These individuals are exempt from Maryland inheritance tax.
Maryland’s estate tax is based on a person’s probate and non-probate property. A Maryland estate tax return is required when the value of the estate exceeds the Maryland estate tax exemption. In 2023, the estate tax exemption is $5 million. Therefore, an estate would need to be worth more than $5 million for the estate to owe taxes to Maryland. Estates are taxed at a rate of 16% for amounts over $5 million.
Maryland estates are also subject to the federal estate tax. However, the estate would need to exceed the federal exemption rate (currently $12.92 million) for the estate to owe federal estate tax.
Effective estate planning can reduce or eliminate estate taxes. A Maryland estate planning attorney can help you develop an estate plan that utilizes various tools to reduce the amount of inheritance and estate tax your loved ones would pay after your death.
Resources for Estate Planning in Maryland
The only way to ensure that your estate passes to the people you choose is to have a Will before your death. Our Maryland estate planning attorney, Steve Thienel, will help you develop a comprehensive estate plan that includes a Will, power of attorney, trust agreement, and other estate documents.
Estate planning protects your property and loved ones now and after your passing. Contact Thienel Law to schedule an appointment to discuss estate planning and administration in Maryland.
Common Questions About Maryland Inheritance Law
Frequently asked questions about Maryland inheritance law include:
Is the Orphans’ Court Involved in Every Probate Estate Opened in Maryland?
The Orphans’ Court is responsible for approving Administration Accounts and various other issues related to probate estates. However, unless there is a dispute or problem with an estate, there should be no need for an Orphans’ Court to conduct a hearing or rule on a matter.
Where Is the Estate Opened When a Person Dies in Maryland With Assets Titled in Their Name?
Typically, an estate is opened in the county or city where the person resided at the time of their death.
What Does Intestate Mean?
Intestate means the person died without a Will. The Maryland intestate laws determine who inherits from the estate.
Is It Possible to Challenge or Dispute the Terms of a Will or Codicil After Someone’s Death?
An interested party may file an action with the Orphans’ Court to challenge or dispute the terms of a Will or Codicil. The party challenging the validity of a Will or Codicil must prove the grounds they state as their reason for disputing or challenging the document, such as the deceased lacked the capacity to sign the document or there was fraud or undue influence in the execution of the Will or Codicil.
Will Maryland Receive a Person’s Property if They Die Without a Will?
In most cases, the State does not receive someone’s property when they die without a Will. The intestate succession includes provisions for distributing property to distant relatives when no close family members survive the decedent.
Does Everyone’s Property End up in Probate When They Die?
Property only passes through probate when a person owns property in their name that does not pass outside of probate. Property that passes outside of probate includes most life insurance policies, jointly titled property with right of survivorship, and some financial accounts.
When Does the Orphans’ Court Appoint a Guardian?
The Orphans’ Court generally appoints a Guardian for a minor child when they inherit property from an estate. If the assets are worth more than $10,000, the Guardian must file a bond and annual reports with the court. The court may also appoint a Guardian of the person if the child needs someone to be responsible for their care.
