DOMESTIC PARTNER INHERITANCE TAX UPDATE
DOMESTIC PARTNER INHERITANCE TAX UPDATE CODE, EST. & TRUSTS § 2-214(g)(1)
In the past, unmarried couples (domestic partners) in Maryland were affected by a specific tax called the Maryland Inheritance Tax. Since the individuals were not legally married, they did not qualify for the inheritance tax exemption, thus subjecting the surviving partner to a 10% inheritance tax upon receiving inherited assets (both by testamentary disposition and by transfer via joint ownership).
Effective as of October 1, 2023, Maryland domestic partners have a statutory avenue to avoid being subject to inheritance tax. The new law creates a Domestic Partnership Registry with each county’s Register of Wills. In the context of estate planning, when planning for unmarried couples who reside in the state of Maryland, you should consider filing a Declaration of Domestic Partnership with their county’s Register of Wills.
To the extent a Declaration of Domestic Partnership is properly registered with the Register of Wills, then a surviving domestic partner is entitled to the following benefits upon the first partner’s death:
Md. Code, Est. & Trusts § 2-214(g)(1)
(i) The share of a surviving spouse or surviving registered domestic partner of an intestate decedent;
(ii) The family allowance for a surviving spouse or surviving registered domestic partner of an intestate decedent;
(iii) Priority of appointment as the personal representative for a surviving spouse, surviving registered domestic partner, and children of an intestate decedent; and
(iv) Exemption from inheritance tax.
In cases where domestic partners have not submitted the declaration, there is still the limited exemption from inheritance tax for the surviving partner as it relates to a jointly owned primary residence with rights of survivorship. To take advantage of this limited exemption on the primary residence, certain proof of partnership must be presented.
Please note, this new law does not provide a surviving domestic partner with a spousal elective share.