Legislation

Inheritance Tax - Exemption - Domestic Partners


What does this new law do?


This law adds "domestic partner" to the list of family members who are exempted from paying state inheritance tax on certain property that passes to them from their deceased domestic partner.

Currently, certain family members do not have to pay a tax when they inherit property. This includes grandparents, parents, spouses, children or spouse of a child, and siblings. Now, the law includes same-sex and opposite-sex domestic partners as well.

This exemption would apply to the primary residence the couple held in joint tenancy at the time of one partner's death.

Couples should download and print out an affidavit of domestic partnership to state you are domestic partners. Click here to download it. You will need to sign this affidavit in front of a notary public and keep it in a safe place.

Who and what does the inheritance tax apply to?


The inheritance tax is only one of three "death taxes" that may apply to transfers at death. There is also the Maryland estate tax and the federal estate tax. The important distinction among them is that the Maryland estate tax applies only to estates valued at more than $1 million, and the federal estate tax applies only to estates worth more than $3.5 million. The inheritance tax, on the other hand, applies to any bequest of more than $1,000 to anyone who is not a close relative, as long as the value of the overall estate is at least $30,000.

Didn't this already pass? Weren't we already exempted if we are on the title together?


No. Last year this Legislature passed a new domestic-partnership law, Senate Bill 597, dealing with the real estate transfer and recordation tax. This legislation allows someone in a same-sex relationship to add his partner to the title of his house without incurring recordation or transfer fees and taxes. This was welcome legislation, but for technical reasons, it can create a two-edged sword for same-sex couples.

Take the example of John and David: If John owns his house outright and then adds David to the title, a legal fiction is created that John and David each own 50 percent of the residence. If David then dies first, John will have to pay an inheritance tax on David's half of the house—even though John owned 100 percent of the house before he added David to the title.

This new inheritance tax law now eliminates the inheritance tax John will have to pay.

What is a domestic partner?


As defined in Maryland statute, a domestic partnership means a relationship between two people (straight or gay) who are at least 18 years old, are not related to one another, are not married or in a civil union or domestic partnership with someone else and agree to be in a relationship of mutual interdependence (meaning you contribute to the maintenance and support of each other and the relationship).

How do we prove we are domestic partners?


It is the intention of the law to have health care facilities and other entities subject to this law to allow a person to say they are the other's domestic partner and that is that. However, these facilities may require a couple to prove they are domestic partners.

If you are asked to provide proof of a domestic partnership the most a facility can require from you is an affidavit AND proof of two documents from the list below.

  • Joint lease, mortgage or loan
  • Designation of one of the individuals as the primary beneficiary on the other's life insurance or retirement plan
  • Designation of one of the individuals as the primary beneficiary of the will of the other
  • Health care or financial power of attorney granted by one of the individuals to the other
  • Joint ownership or lease of a motor vehicle
  • Joint checking account, investment or credit card
  • Joint renter's or homeowner's insurance
  • Coverage on a health insurance policy
  • Joint responsibility for child care, such as a guardianship or school documents
  • Relationship or cohabitation agreement

Where do we get an affidavit?


Equality Maryland has an affidavit that you can download and print out. Click here. You will need to sign this affidavit in front of a notary public and keep it in a safe place.

What happens if my partner passes away and I have a problem getting an exemption to the tax?


Please contact Equality Maryland at 301 587-7500 or info@equalitymaryland.org and we will try and help.

Does this bill exempt domestic partners' other assets from the inheritance tax?


Unfortunately, no. There should be complete repeal of the Maryland inheritance tax for property passing to a decedent's domestic partner, as is the case for spouses. However, this bill is a step in the right direction. It does at least provide protection for a couple's primary residence - if the property is owned as joint tenants - and protect the surviving domestic partner from what can be a crippling inheritance tax bill.

What do I need to do now?


Make sure you have an affidavit filled out. Equality Maryland has an affidavit that you can download and print out. Click here. You will need to sign this affidavit in front of a notary public and keep it in a safe place.