How to Protect Assets from Maryland's Estate and Inheritance Tax Using a POA

Maryland is the only state in the nation that imposes both a state estate tax and a separate inheritance tax. If you're trying to protect assets from this dual tax exposure, a power of attorney with the right authority language is your most cost-effective tool — because the strategies that minimize both taxes (beneficiary redesignation, joint titling, strategic lifetime transfers) all require someone with legal authority to act, and that authority comes from the POA.

Here's what you're up against: Maryland's estate tax kicks in at $5 million, unchanged even after the 2025 federal increase to $15 million. On top of that, any transfer to a non-lineal heir — stepchildren, nieces, nephews, unmarried partners, friends — triggers a flat 10% inheritance tax. Spouses and lineal descendants (children, grandchildren) are completely exempt from the inheritance tax, but not from the estate tax.

The Dual Tax Problem

Most states have one death tax or neither. Maryland has both, and they operate independently:

The estate tax is calculated on the total value of the estate. The inheritance tax is calculated on individual transfers to specific recipients. A $6 million estate passing entirely to a spouse owes estate tax on the amount above $5 million but zero inheritance tax. The same estate passing to a nephew owes both the estate tax and a 10% inheritance tax on every dollar the nephew receives.

Legislative attempts to repeal the Maryland estate tax — including Senate Bill 211 in 2026 — died in committee. The $5 million exemption is staying.

How a POA Enables Tax Protection

A power of attorney doesn't reduce your tax bill by itself. What it does is give your agent the legal authority to execute the strategies that do:

1. Beneficiary Redesignation

Life insurance policies, retirement accounts (IRAs, 401(k)s), and payable-on-death bank accounts all pass outside probate — and they can be structured to pass to inheritance-tax-exempt recipients. Your POA agent can update beneficiary designations to route assets to spouses and lineal descendants (0% inheritance tax) rather than non-lineal heirs (10% tax).

This requires express authority in the POA to manage beneficiary designations — a "hot power" that generic forms typically omit.

2. Joint Titling with Right of Survivorship

Assets held in joint tenancy with right of survivorship pass directly to the surviving joint tenant without probate and without inheritance tax (if the survivor is a spouse or lineal descendant). Your POA agent can retitle bank accounts, brokerage accounts, and real property into joint ownership — but only if the POA grants authority for real property transactions and asset transfers.

For real estate, the POA must be recorded in the county Land Records under Real Property § 4-107 before the agent can execute any deed.

3. Strategic Lifetime Transfers

Annual gifts up to the federal exclusion ($18,000 per recipient in 2025) reduce the taxable estate without triggering gift tax. For families with estates near or above the $5 million threshold, a multi-year gifting strategy can bring the estate below the exemption.

Your POA agent needs express gifting authority — another hot power that most standard forms don't include. The 2023 Maryland amendments expanded some default gifting powers, but the interaction between gifting authority and the agent's fiduciary duty to the principal means the POA should be explicit about the scope and limits.

4. Spousal Transfers and the Elective Share

Maryland law guarantees a surviving spouse one-third of the augmented estate (one-half if no descendants). The augmented estate includes non-probate assets like joint accounts and living trusts. Your POA agent needs to understand these limits before making any lifetime transfers — an agent who transfers assets away from the principal in a way that defeats the spouse's elective share faces breach-of-fiduciary-duty claims.

The Maryland Power of Attorney Kit includes a dual tax planning worksheet that maps each asset against both taxes and identifies which transfer strategies apply.

Who This Is For

• Families with estates between $3 million and $15 million — above Maryland's $5M threshold but below the federal $15M exemption, where state-level planning makes the biggest difference
• Anyone leaving assets to non-lineal heirs: stepchildren, domestic partners, nieces, nephews, friends, or charities
• Blended families where the inheritance tax creates an unequal burden between biological children (exempt) and stepchildren (10% tax)
• Unmarried or domestic partners whose inheritance is fully subject to the 10% tax with zero exemption
• Families who want to start a multi-year gifting strategy to bring the estate below $5 million

Who This Is NOT For

• Families with estates well below $3 million and no non-lineal heirs (your dual tax exposure is minimal)
• Estates passing entirely to a surviving spouse (unlimited marital deduction shields from both taxes)
• Anyone who needs a complex irrevocable trust or charitable remainder trust (consult an estate planning attorney)
• Non-Maryland residents whose assets are in other states (Maryland tax applies to Maryland property and Maryland domiciliaries)

The Blended Family Tax Trap

The inheritance tax hits blended families hardest. Consider this scenario: a Maryland resident with a $4 million estate, two biological children, and two stepchildren. The biological children inherit tax-free. The stepchildren each owe 10% on their share — potentially $40,000+ per stepchild in inheritance tax alone, on money that's already been subject to income tax over a lifetime.

With a properly authorized POA agent, the parent can execute a gifting strategy during their lifetime — transferring $18,000 per year to each stepchild — that reduces the taxable transfer without triggering gift tax. Over 10 years, that's $180,000 per stepchild moved outside the inheritance tax entirely.

But the agent can't do any of this without express gifting authority in the POA. And most generic forms don't include it.

The Unmarried Partner Problem

Maryland's default intestacy and administrative laws provide zero protection for unmarried partners. If you die without a will or POA, your partner gets nothing — your assets go to your parents, siblings, or more distant relatives by default. And any assets you do manage to leave your partner through a will are hit with the full 10% inheritance tax.

A POA with gifting authority lets your agent begin transferring assets to your partner during your lifetime, using the annual gift tax exclusion, to minimize the amount exposed to inheritance tax at death.

The Maryland Power of Attorney Kit addresses this directly — with the dual tax worksheet, hot powers checklist, and the authority language your agent needs to execute tax-minimizing transfers.

Frequently Asked Questions

Is there any way to avoid Maryland's inheritance tax completely?

For spouses and lineal descendants (children, grandchildren, parents), yes — they're fully exempt. For everyone else, the 10% tax applies to every dollar transferred. The strategies above (lifetime gifting, joint titling, beneficiary redesignation) reduce the amount exposed to the tax, but they don't eliminate it entirely for non-lineal heirs. Maryland has no inheritance tax exemption amount — it's 10% from dollar one.

Does the federal estate tax exemption increase help with Maryland taxes?

Only partially. The 2025 federal increase to $15 million means most families no longer owe federal estate tax. But Maryland kept its exemption at $5 million, so estates between $5M and $15M now owe Maryland estate tax that they wouldn't owe federally. The inheritance tax is entirely separate and unaffected by the federal change.

Can my POA agent make gifts to reduce my estate while I'm alive?

Yes, if the POA includes express gifting authority. Annual gifts up to $18,000 per recipient (2025) don't trigger federal gift tax. But your agent must balance gifting against their fiduciary duty — they can't deplete your assets to the point where you can't pay for your own care. The kit's hot powers checklist maps the boundaries.

What's the difference between estate tax and inheritance tax in Maryland?

The estate tax is paid by the estate itself, calculated on the total value above $5 million. The inheritance tax is paid by individual recipients based on their relationship to the deceased — 0% for spouses and lineal descendants, 10% for everyone else. You can owe both on the same estate.

Should I hire an attorney instead of using a kit for dual tax planning?

For estates above $5 million or complex trust strategies, an attorney earns their fee. For estates under $5 million where the main concern is inheritance tax on non-lineal heirs, a kit with the right authority language and tax worksheets handles the planning. The kit costs less than 15 minutes of a Maryland estate planning attorney's time.

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