Will Your Maryland Heirs Pay the 10% Inheritance Tax?

Picture this: you've lived with your partner for 22 years. You own a row house in Federal Hill together, but only your name is on the deed. You die. Maryland takes 10% of that house's value before your partner sees a dime.

No wedding ring, no exemption. That's the rule.

Maryland is the only state in the country that charges both an estate tax and a separate inheritance tax. And while the federal estate tax exemption jumped to $15 million under the OBBBA — meaning almost no one owes federal estate tax anymore — the 10% Maryland inheritance tax doesn't care how big or small your estate is. It only cares who's inheriting.

A March 3, 2026 Maryland Reporter analysis confirmed the tax is alive and well in 2026. For many middle-class Maryland families, this is a much bigger planning problem than the estate tax ever was.

Who Actually Pays the 10%

Maryland's inheritance tax is based on relationships, not dollar amounts. The state divides your potential heirs into two camps.

Exempt (pay nothing):

• Spouses
• Children, stepchildren, grandchildren
• Parents, grandparents
• Siblings
• Sons-in-law and daughters-in-law
• Domestic partners who have registered with the state and meet specific requirements

Not exempt (pay 10%):

• Unmarried partners who haven't registered as domestic partners
• Nieces and nephews
• Aunts and uncles
• Cousins
• Friends
• Any non-relative

That second list is where the surprises happen. A favorite niece who took care of you for the last decade of your life? She owes 10%. A close friend you wanted to leave your record collection to? Same. The partner you've shared a home and life with but never married? Yep.

This tax applies to any property passing through your estate to a non-exempt person — real estate, bank accounts, retirement plans, life insurance proceeds payable to the estate, even some jointly held property. The Maryland Register of Wills collects it during probate.

A Real Maryland Scenario

Say you own a Baltimore County home worth $475,000, a brokerage account with $180,000, and a $50,000 life insurance policy. Total estate: $705,000.

You leave everything to your unmarried partner of 18 years.

Maryland's estate tax exemption is $5 million, so you owe nothing there. Federal estate tax? Not even close to the $15 million threshold. You'd think your partner is fine.

But the inheritance tax kicks in:

• 10% of $705,000 = $70,500 owed to the state

That's before probate fees, before any debts, before your partner gets the keys. And probate in Maryland typically eats another 2–4% of the estate in court costs and personal representative commissions, so add roughly $14,000–$28,000 on top.

Your partner inherits $475,000 worth of house — and has to come up with $70,500 in cash to settle the tax bill. If they can't, they may have to sell the home they've lived in for nearly two decades.

How to Plan Around It

The good news: the 10% is avoidable with the right structure. The bad news: it has to be set up while you're alive and competent.

1. Get married or register as domestic partners. Maryland recognizes registered domestic partnerships for inheritance tax purposes if you meet the statutory requirements (shared residence, joint financial responsibility, sworn affidavit). For couples who don't want to marry, this is the cleanest fix.

2. Title property as joint tenants with right of survivorship. When your partner is named on the deed as a joint tenant, the property passes outside probate. Maryland still applies inheritance tax to the half that transfers at death for non-exempt joint owners — but if the joint tenancy was established and your partner contributed to the purchase, the taxable portion can be reduced.

3. Use a revocable living trust. A trust doesn't avoid the inheritance tax by itself, but it avoids probate, keeps things private, and gives you cleaner control over how assets are distributed. For larger estates, irrevocable trusts can shift assets out of your taxable estate entirely. If you're weighing this, our guide on whether you need a revocable living trust in 2026 walks through the tradeoffs.

4. Name beneficiaries directly on accounts. Retirement accounts, life insurance, and payable-on-death bank accounts pass directly to named beneficiaries. The inheritance tax may still apply, but you avoid probate fees and delays. And payable-on-death designations are easier to update than a will.

5. Make lifetime gifts. Maryland has no gift tax. The federal annual exclusion is $19,000 per recipient in 2026. Gifting assets while you're alive transfers them tax-free at the state level — and they're not in your estate when you die.

What Maryland Changed Recently

A few 2025 and 2026 bills are worth knowing about if you're planning now.

HB17, enrolled in April 2026, updates the venue rules for probate and clarifies how the inheritance tax applies in certain cross-county estates. It's a technical fix, but it matters if you own property in more than one Maryland county.

SB158 and HB88, passed in April 2025, modernized the Maryland Trust Decanting Act. If you have an older irrevocable trust that doesn't reflect your current wishes — including outdated beneficiary designations — decanting lets a trustee pour the assets into a new, better-drafted trust without going to court.

HB261 reordered how unpaid child support gets paid out of an estate. Worth knowing if you have arrears.

Choosing a Beneficiary in Maryland

A beneficiary is whoever receives an asset when you die. That sounds simple, but Maryland's tax structure makes the choice carry weight.

If you're picking between, say, leaving your IRA to your sister (exempt) or your nephew (10% tax), the math matters. A $200,000 IRA to your sister: she gets $200,000. To your nephew: he gets $180,000 and the state gets $20,000.

This isn't a reason to disinherit anyone you love. It's a reason to plan around it. You might leave the IRA to your sister and the house to your nephew, with instructions for your sister to gift him cash over time using the annual exclusion. There are dozens of structures like this.

DIY, Online, or Attorney?

For a Maryland estate plan that addresses the inheritance tax, here's roughly what you'll spend:

• DIY with paper forms: $0–$50. Risky if you have non-traditional beneficiaries or property in multiple states.
• Online estate planning platform: $200–$600 for a will, trust, healthcare directive, and powers of attorney bundle. Includes online notarization in most cases.
• Maryland estate planning attorney: $1,500–$3,500 for a basic plan, $4,000–$8,000 for a plan with trusts and tax planning.

For unmarried couples or anyone with non-exempt beneficiaries, the attorney route is often worth it the first time around — because the savings on a single 10% inheritance tax bill can dwarf the legal fees. After that, an online platform can keep documents updated as life changes.

Inhira is building a platform that includes wills, revocable living trusts, healthcare directives, powers of attorney, and HIPAA authorizations in one guided workflow, with online notarization built in. It's available online at inhira.com.

Common Questions

Q: Does Maryland's inheritance tax apply to life insurance? A: It depends on who the beneficiary is. Life insurance paid directly to a named individual beneficiary is generally exempt from Maryland inheritance tax. But if it's paid to your estate, it becomes part of probate and the 10% applies for non-exempt heirs.

Q: What if my partner and I register as domestic partners — does that fully solve it? A: Registered domestic partners qualify for the same inheritance tax exemption as spouses for primary residence transfers and certain other assets. You'll need to meet the statutory requirements (shared residence, joint financial obligations, sworn affidavit filed with the Register of Wills). Talk to an attorney about whether your situation qualifies.

Q: Can I just put my partner's name on my house deed to avoid the tax? A: Adding someone to a deed during your lifetime is technically a gift, which can have its own tax consequences and may affect your eligibility for Medicaid down the line. It can work — but it needs to be done carefully, ideally with legal advice.

Q: Does the inheritance tax apply if I move out of Maryland before I die? A: Maryland's inheritance tax applies to Maryland-situs property regardless of where you live when you die. So if you keep your Annapolis condo and rent in Florida, the condo still gets taxed. Real residency changes — and selling the Maryland property — are what move you out of reach.

Q: Do I still need a will if I name beneficiaries on everything? A: Yes. A will covers anything you forgot, anything that fails to transfer for any reason, and any minor children's guardianship. For more on whether you can handle this without a lawyer, see our piece on making a legal will without an attorney — written for California, but the principles apply broadly.

The tax exists. It's been there for decades, and there's no sign Maryland plans to repeal it. What you can control is who pays it, how much, and whether the people you love spend their grief scrambling for cash to keep your house. That part's on the planning you do now.