Q: Does my nephew pay 10% tax in Maryland when upon my death he is the beneficiary of $10,000.00 from my savings account?
A: A nonlineal heir (and non-spouse or sibling) of an estate, such as your nephew, will have 10% of the value of his bequest withheld for Maryland's inheritance tax. This tax applies to assets that pass through your estate as well as to jointly owned assets. and assets that are in your name and over which you have the power to direct who receives the assets upon your death, including named beneficiaries. If your savings account has Transfer of Death beneficiaries named on the account documents, then the money in the savings account does not become an asset of your estate, but is paid directly to the named beneficiary. A TOD beneficiary is also subject to inheritance taxes on the receipt of those funds because you held the account in your name at the time of your death and controlled who was named as a beneficiary of the account. The inheritance tax is currently 10%, and is imposed on the recipient of the money, unless the recipient is exempt from the tax (a decedent's spouse, parent, sibling, child, spouse of child, grandchild, and other lineal heirs are all exempt).
A: Short answer is "yes." Under current Maryland law, a niece/nephew pays 10% on the value of what they inherit from an aunt/uncle (whether through a Will, co-owned account or a POD account).
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