Pasternak & Fidis Reporter

January 30, 2018

State Estate and Inheritance Taxes after the Tax Cuts and Jobs Act

The doubling of the federal estate tax exemption under the Tax Cuts and Jobs Act has moved many wealthy Americans away from the impact of the federal estate tax.  However, state estate taxes and inheritance taxes remain a factor in estate planning for residents of a number of states, including Maryland and the District of Columbia.  Moreover, a state level estate or inheritance tax may be imposed on real estate located in a state with a tax even when the decedent resides elsewhere.

Currently, only a handful of jurisdictions have an estate tax.  These include the District of Columbia and Maryland as well as Connecticut, Hawaii, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington.  The District of Columbia’s estate tax exemption amount currently matches the federal estate tax exemption.  Maryland’s is currently set to match the federal exemption in 2019.  Jurisdictions with state exemptions that are tied to the federal exemption may react to the doubled federal exemption amount by capping their own; these states likely did not anticipate such a drastic increase in the federal exemption and may scramble to preserve their revenues.  The states that have not matched their estate tax exemptions to the federal exemption have significantly lower exemptions.  As state level changes may come in the wake of the changes to federal law, it is important to remain attuned to changes in state estate tax laws.

Presently, six states, in addition to or in lieu of an estate tax, have an inheritance tax:  Maryland, Kentucky, Nebraska, New Jersey, and Pennsylvania.  Inheritance tax is imposed on the receipt of property from a decedent’s estate by a beneficiary, unless the beneficiary is exempt.  There is no uniformity among state inheritance tax statutes; the rate varies by state as do the rules for determining which beneficiaries are exempt.  For example, a child of the decedent and the child’s spouse are both exempt from inheritance tax in Maryland.  In New Jersey, a child of the decedent is exempt, but the child’s spouse is not.

This disparity can be of particular importance when a decedent leaves real property, such as a vacation home, to his or her child and the child’s spouse.  If the vacation home is in New Jersey, the child’s spouse incurs an inheritance tax as to his or her 50 percent portion; if the home is in Maryland, the child’s spouse incurs no inheritance tax on the value of the home.  For another example, if a decedent whose principal residence is in the District of Columbia, which does not levy an inheritance tax, owns a cabin in Stroudsburg, Pennsylvania, and leaves it to his or her child, Pennsylvania will assess an inheritance tax on the value of the property; Pennsylvania has an inheritance tax and a child is not exempt from the tax.

When the federal estate tax exemption is low and its impact widespread, its significance eclipses state estate and inheritance taxes.  The recent doubling of the federal estate tax exemption diminishes its significance to many estate plans, making state estate tax and inheritance tax laws comparatively more important.

January 29, 2018

The District of Columbia Death with Dignity Act

The District of Columbia Death with Dignity Act allows an adult D.C. resident who is terminally ill (i.e., medically confirmed to have less than six months to live) to request medication to voluntarily end his or her life.

In order for a patient to participate in the Death with Dignity program, the following requirements must be met:

  • The patient must be capable of communicating health care decisions to health care providers on his or her own; an agent may not make the request on behalf of a patient.
  • The patient must make two oral requests (separated by at least 15 days) and one written request to an attending physician.
  • The written request requires two witnesses, one of whom cannot be a relative, someone entitled… MORE >

October 18, 2017

Changes to Maryland Law Increase Ease, Efficiency, and Consistency in Family Law

The Maryland General Assembly recently took several actions impacting domestic relations that will increase ease, efficiency, and consistency for those navigating the family court system.

Domestic Violence Orders Admissible in Maryland Divorce Suits

Protective orders (a form of domestic violence order) are designed to end and prevent abuse between family or household members.  Current or former spouses, people who have lived together in an intimate relationship for at least 90 days during the past year, people who have been in a sexual relationship within the past year, people who share children together, people who are in a caretaker-vulnerable adult relationship, and family members can file for a protective order 24 hours a day in Maryland.  In a protective order, a judge can order the abuser… MORE >

October 17, 2017

“To my descendants, per stirpes…” (or… How do we pass the Packers’ tickets to our grandkids?)

Years ago, I described to a close friend (let’s call her Cathy) the difference between a division among descendants per stirpes and a division among the same descendants per capita at each generation.  In the midst of my explanation, Cathy suddenly exclaimed, “Oh!  You mean like the Packers’ tickets?”  This was a Eureka! moment; yes, it’s exactly like the Packers’ tickets.

One very important lesson I learned attending college in Wisconsin is that Packers’ tickets are a sacred thing.  The population of Green Bay is 105,000.  After recent expansions, Lambeau Field now seats 81,435, but season tickets are still very hard to come by.  For many, the surest way to get them is to inherit them.

Back in the days of Bart Starr and Vince… MORE >

October 10, 2017

Life Insurance and Divorce – Virginia Legislature Extends Authority of Divorce Courts Over Life Insurance Policies of Spousal Support Obligors

Spousal support is an important element of many divorces.  When couples have been married for a long time, have supported each other’s careers, and have made sacrifices in their own lives in order to provide that support, alimony is often essential to afford former spouses financial security as they rebuild their lives as individuals outside of marriage.

A major concern those receiving support may have is: “what happens if my former spouse dies?” In Maryland, D.C., and Virginia, spousal support obligations terminate upon the death of either party.  When married, life insurance helps to protect people from the financial devastation that can result from losing a spouse.  Divorce can affect life insurance beneficiary designations.  In Virginia, divorce automatically divests a former spouse of any interest… MORE >

June 20, 2017

Premarital Agreements and the Migratory Couple

A premarital agreement is a contract between persons intending to marry.  It determines spousal rights when the marriage ends by death or dissolution.  All states enforce properly made premarital agreements.  However, laws governing validity vary among the states.  What if a couple signs a premarital agreement in Virginia and later moves to Maryland?  Will a Maryland court enforce the agreement even though Maryland law of validity imposes a higher standard than Virginia law?

Contract law permits the premarital agreement to choose the law that will govern a dispute about validity of the agreement or enforceability of a specific provision even when the dispute must be resolved in another state’s courts.  Can the couple rest easy, knowing the law chosen in the contract—Virginia law in the… MORE >