Maryland Inheritance Tax Exemptions: Family, Property, and Charities

Maryland inheritance tax exemptions fall into two groups: people who are exempt because of their relationship to the person who died, and property that is exempt because of what it is. Close family members, registered domestic partners, and qualifying charities pay nothing. Life insurance proceeds paid to a named beneficiary, qualifying pension payments, post-death income on probate assets, and certain conservation-easement farmland are also exempt. Everyone and everything else is taxed at 10% of the clear value received, under Sections 7-203 and 7-204 of the Tax-General Article.¹²

The tax is the beneficiary’s responsibility, not the estate’s, and the Register of Wills in the county where the decedent lived or owned property handles assessment and collection.³ Whether you owe anything depends almost entirely on which category below you fit into.

Family Members Who Are Exempt

Section 7-203(b)(2) lists the relatives who pay no inheritance tax on what they receive:¹

The surviving spouse, provided they have not remarried at the time the property passes.
Children and their descendants (grandchildren, great-grandchildren, and further down the line). “Child” includes stepchildren and former stepchildren.
Parents and grandparents. “Parent” includes stepparents and former stepparents.
Brothers and sisters of the decedent.
Spouses of children and of other lineal descendants — a son-in-law or daughter-in-law, for example.
The surviving spouse of a child who died before the decedent, if the couple was still married when the child died.
A corporation, partnership, or LLC in which every owner is a person from one of the categories above.

Two definitional points cause more surprise bills than any other part of the statute. First, the stepchild rule works in the taxpayer’s favor: a stepchild from a marriage that has since ended still counts as a “child” and is exempt. Second, the remarriage restriction cuts the other way. If a surviving spouse remarries before the property actually passes, the spousal exemption is lost.

Registered Domestic Partners

Section 7-203(l) exempts a domestic partner, but only if the partnership is registered under Section 2-214 of the Estates and Trusts Article.¹ An unregistered relationship does not qualify. Length of cohabitation, shared finances, and mutual acknowledgment are all irrelevant to the tax question. If you want your partner to inherit free of the 10% tax, the registration itself is what matters.

Who Is Not Exempt

Nieces, nephews, cousins, more distant relatives, friends, unmarried partners without a registered partnership, and business associates are outside the family exemption. If you are in one of these groups, expect to pay 10% on the fair market value of what you receive, less any debts or encumbrances on the property. The one narrow break for a niece or nephew appears below, in the conservation-easement rule.

Property That Is Exempt Regardless of Who Inherits

Several types of property escape the inheritance tax on their own terms, without regard to the beneficiary’s relationship.

Life Insurance Proceeds Paid to a Named Beneficiary

Life insurance proceeds are exempt when paid to any named beneficiary other than the estate of the insured.¹ The distinction is worth pausing on. A policy that names a specific person pays out tax-free. A policy payable to “my estate” folds those proceeds back into the taxable estate and loses the exemption. Checking beneficiary designations is one of the simplest ways to keep a tax bill from appearing where none needs to.

Qualifying Pension and Employee Benefit Payments

Annuities and payments from public or private employee pension or benefit plans are exempt under Section 7-203(a) if they are not taxable for federal estate tax purposes.¹ Whether a particular account clears that federal test depends on its treatment, so IRAs, 401(k)s, and similar accounts are worth confirming with a tax advisor rather than assuming.

Post-Death Income on Probate Assets

Income that accrues on probate assets after the date of death, along with gains and losses, is exempt under Section 7-203(j).¹ If a brokerage account grows between the date of death and the date of distribution, the growth itself is not taxed.

Farmland With a Perpetual Conservation Easement

Section 7-203(m) exempts real property subject to a perpetual conservation easement when it passes to a niece or nephew of the decedent. The exemption is narrow: it applies only to nieces and nephews, who would otherwise owe the tax. If the property later stops being used for farming, the tax that would have been owed is recaptured.

Charitable Organizations

Property left to a qualifying charity is exempt. The organization must be tax-exempt under Section 501(c)(3) of the Internal Revenue Code or qualify for the federal estate tax charitable deduction under Section 2055.¹ Most recognized charities, religious organizations, and educational institutions meet one of those standards. A charitable bequest removes the gifted amount from the inheritance tax calculation entirely.

Protecting an Exemption You Actually Qualify For

The most consequential mistake in administering an estate is misidentifying the relationship between the decedent and the beneficiary. A niece treated as “family” can end up with an unexpected 10% bill, because nieces and nephews are not on the exempt list. A stepchild who is exempt can be wrongly taxed if the personal representative does not realize that the statutory definition of “child” includes stepchildren and former stepchildren.

Clear documentation heads off these disputes with the Register of Wills. That means marriage certificates for spouses and in-laws, adoption records where relevant, and, for unmarried couples, the domestic partnership registration under Section 2-214. On the property side, the equivalent housekeeping is checking that life insurance policies name individual beneficiaries rather than the estate, and confirming that pension and retirement accounts are set up to pass in a way that preserves the federal treatment on which the Maryland exemption depends.

One boundary worth noting: these exemptions apply only to Maryland’s inheritance tax. Maryland also imposes a separate estate tax on estates above a threshold, and the federal government imposes its own estate tax at a much higher threshold. Being exempt from the inheritance tax does not, on its own, resolve either of those.⁴

1
Maryland General Assembly. Maryland Tax – General Code Section 7-203 (2025) – Exemptions
2
Justia Case Law. Maryland Tax – General Code Title 7, Subtitle 2 (2025) – Inheritance Tax
3
Maryland Register of Wills. Inheritance Tax
4
Maryland Comptroller. What You Need to Know About Maryland’s Estate Tax