Legal Question in Wills and Trusts in Maryland

I am doing estate planning for my great-uncle, who lives in Maryland. I will be his personal representative when his will is eventually probated.

He lives is a life-care community with the common fee structure of an entrance fee, 90% refundable when he leaves, and a monthly fee. The 90% refund is paid if he leaves or when he dies. When he entered, he signed a beneficiary form for the refund - his choices were to pay the refund to the estate, or pay it to various family members (75% to one nephew, 25% to another nephew). The refund is not actually paid until another person occupies the apartment.

My question is - when the recipients get the money, what is this transfer? Is it income to them? Is it the receipt of a non-probate asset (like an IRA beneficiary or POD account)? Is Maryland inheritance tax due on this money? If it is, what happens when the Register of Wills bills for the inheritance tax, but the intended recipient has no money because the apartment is still empty?

Thanks


Asked on 1/12/14, 4:26 pm

1 Answer from Attorneys
Cedulie Laumann Arden Law Firm, LLC

Several different taxes can come into play when someone dies in Maryland, including federal death taxes, state death taxes (based on amount of property), inheritance taxes (based on amount and the recipient's status), probate taxes (based on amount of probate estate), estate income taxes and capital gains taxes.

Generally speaking, most assets that transfer on death are not income to the receiver. Generally speaking inheritance tax is calculated whether or not the property passed through probate. Sometimes an estate will not have liquid assets but will need to get a loan to pay expenses until estates liquidate. Which of these taxes depends in great measure on the precise details.

You are strongly encouraged to meet with an attorney (and possibly an accountant / tax advisor as well) to hash out the specifics of your particular situation. While I hope this general information helps it is not designed to substitute for getting personalized advice tailored to the specifics of your situation.

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Answered on 1/23/14, 5:19 pm


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