Big 2019 changes to Estate Tax Exemption in DC and Maryland are on it’s way! The federal tax reform legislation adopted by Congress at the close of 2017 more than doubled the federal estate tax exemption – the amount that can be transferred upon death without paying any tax.
Existing legislation in the District of Columbia called for the exemption level to match the federal level in 2018; legislation in Maryland called for a match with the federal exemption level beginning in 2019.
However, Maryland recently introduced changes that reduce its estate tax exemption and the District of Columbia is preparing to do the same.
2019 Changes to Estate Tax Exemption Maryland
In Maryland, a law introduced in 2014 gradually increased the estate tax exemption every year until the year 2019. For 2017, the estate tax exemption was $3 million. For 2018, the estate tax exemption in Maryland is $4 million. In 2019, the exemption level was scheduled to match the federal estate tax exemption amount, which is $11.2 million.
But Maryland recently adopted changes to separate from the federal exclusion amount and limit the state estate tax exclusion to $5 million in 2019, with no adjustment for inflation in future years.
The changes also allow a deceased spouse’s unused Maryland estate tax exclusion to be transferred to a surviving spouse. These changes apply to estates of descendants who die on or after January 1, 2019.
D.C. Estate Tax Exemption
The estate tax exemption for 2018 in the District of Columbia is at a record level. Exemptions for 2018 and future years was increased to match the federal exclusion amount — a significant jump from the $2 million exemption in 2017 to the current $11.2 level for 2018.
However, the Council of the District of Columbia is seeking to reduce this amount by 50 percent, introducing a bill to retroactively change the D.C. estate tax exemption to $5.6 million for 2018, an amount that is to be adjusted for inflation in future years.
Changes in Tax Laws May Require Changes to Estate Plans
When federal or state tax laws change, as in these 2019 Changes to Estate Tax Exemptions, it is important to review your overall estate plan and long-term financial strategy as new legislation may warrant a change to your existing plan.
Pursuant to legislation passed in 2014, the Maryland estate tax exemption continues to increase as follows:
- 2018 — $4,000,000 (an increase of $1,000,000 from 2017)
- 2019 and thereafter — the Maryland exemption will match the federal basic exclusion amount
The Maryland estate tax exemption is not portable between spouses until it aligns with the federal exemption in 2019 and thereafter. With respect to gift tax, Maryland has no state gift tax.
Virginia repealed its estate tax in 2007 and continues to have no state estate tax and no state gift tax.
District of Columbia
- As modified by legislation enacted in 2017, the DC estate tax exemption (called the “zero bracket amount”) now matches the federal basic exclusion amount, and thus has increased from $2 million to $11.2 million per person. Unlike the federal exemption, there is no provision for portability of the DC estate tax exemption between spouses.
Finally, like Maryland and Virginia, DC has no gift tax.
Although the 2017 tax law has increased the estate, gift and GST tax exemption amounts, it does not change the structure of the estate tax, nor does it change the provisions of the federal gift tax and GST tax. Irrespective of taxes, there are many nontax issues which a well-designed estate plan should address, such as guardianship of minor children, planning for loved ones with special needs, family business succession and asset protection.
Altman & Associates stays up-to-date on all Maryland, D.C. and Virginia tax laws, with in-depth knowledge of how to best maximize financial opportunities to achieve your long-term objectives.
To discuss the changes to Estate Tax Exemptions, available financial tools, and how to best plan for your future, contact us at 301-468-3220 or online to arrange for a confidential consultation. Altman & Associates has offices in Rockville, Columbia, Washington, D.C. and Northern Virginia.