If someone close to you passed away in Maryland and left behind property or money, you might need to deal with the probate process and possibly inheritance tax. It’s not something most people plan for, but skipping steps or misunderstanding deadlines can lead to penalties or delays in receiving what’s rightfully yours. The rules here are specific, and they don’t always work the way people expect.

What exactly is the Maryland inheritance tax, and who has to pay it?

Maryland is one of only a few states that still charges an inheritance tax separate from estate tax. This tax applies to certain beneficiaries based on their relationship to the person who died. Spouses, parents, children, grandparents, grandchildren, siblings, and step-relatives are exempt. Everyone else like nieces, nephews, cousins, friends, or unmarried partners may owe 10% on what they inherit.

The tax doesn’t kick in automatically for everyone. If the deceased was a Maryland resident, or owned real property here, the tax likely applies. Cash, bank accounts, personal belongings, and real estate located in Maryland can all be subject to it.

When does inheritance tax come up during probate?

Probate is the court-supervised process of validating a will (if there is one), paying debts, and distributing assets. Inheritance tax usually becomes relevant after the Personal Representative (executor) files an inventory of the estate’s assets. The Register of Wills will notify beneficiaries if tax is due.

You’ll typically have nine months from the date of death to pay. Interest starts accruing after that. If you’re unsure whether you qualify for an exemption, check the list of exempt relationships before assuming you’re off the hook.

How do you know how much you owe?

The tax is calculated on the value of what you receive not the entire estate. For example, if you inherit $50,000 as a cousin, you’d owe $5,000 (10%). Some assets, like life insurance paid directly to a named beneficiary, aren’t included. Real estate transfers may also have special rules.

If numbers feel confusing, walk through how the math works in common scenarios. Many people overpay because they include non-taxable items or miscalculate timing.

What paperwork is required, and where do you file it?

The Personal Representative must file an Information Report with the local Register of Wills within three months of appointment. Beneficiaries who owe tax will get a Notice of Assessment. You don’t file a return yourself unless asked but you should respond promptly to any notices.

Keep copies of deeds, account statements, and appraisals. If you’re handling things without a lawyer, review the documentation expectations so you don’t miss something simple that causes a delay.

Can you avoid this tax with planning?

Yes but only if done before death. Gifts made more than two years before passing aren’t taxed. Trusts, joint ownership with rights of survivorship, and beneficiary designations on retirement accounts or life insurance can bypass probate and sometimes the tax altogether.

If you’re still planning your own estate, take a look at which forms help structure gifts or trusts correctly. After death, options are limited.

Common mistakes people make

  • Assuming “no will” means no tax it doesn’t. Intestate estates still go through probate and may trigger inheritance tax.
  • Missing the 9-month payment window and getting hit with interest.
  • Paying tax on assets that aren’t taxable (like life insurance or jointly held property).
  • Not asking for an extension if they need more time you can request one, but you must ask before the deadline.

What if you can’t afford to pay right away?

Maryland allows payment plans in some cases, especially if the inheritance includes real estate that can’t be sold quickly. Contact the Comptroller’s Office early don’t wait until you get a penalty notice. You can find contact info and procedures on the Maryland Comptroller’s website.

Is there a difference between estate tax and inheritance tax in Maryland?

Yes. Estate tax is paid by the estate itself if its total value exceeds $5 million (as of 2024). Inheritance tax is paid by individual beneficiaries who aren’t closely related to the deceased. One estate could owe both, neither, or just one depending on size and who inherits.

If you’re sorting out which applies to your situation, start with the overview of how both taxes interact during probate.

Next step: If you’re named in a will or stand to inherit from someone who died in Maryland, write down your relationship to them, list what you’re set to receive, and check whether it’s cash, property, or something else. Then decide: Do you need to calculate tax? File paperwork? Ask for an extension? Start there don’t wait for a letter to arrive.