Gaithersburg: 301-670-7030
Baltimore: 410-769-5400
Frederick: 301-668-2100
Contact Us For Legal Help

Wills and Estates Blog

Domestic Partnerships: How to Avoid Costly Inheritance Taxes on the Family Home

Tuesday, September 20, 2016

In this modern era, families come in all shapes in sizes. It has become fairly common for same sex couples to buy a home and raise children. Then there are opposite sex couples who share their lives, including buying a house together, but forego the formalities of marriage. In 2009 the Maryland legislature enacted legislation providing some measure of protection to these more nontraditional families. Specifically, the legislature created “domestic partnerships” and imbued them with one of the legal advantages of marriage.

At death Maryland imposes an inheritance tax of 10% on all assets that pass to people who are unrelated to the decedent or who are further removed in relationship than a brother or sister. Importantly, there is no inheritance tax imposed on assets passing to a spouse. Thus when the family house, often times the most valuable asset in the estate, passes to the surviving spouse, it is subject to no inheritance tax.

People who are neither married or closely related, but who jointly own their own house have a problem. When the first dies, the second becomes the legal owner of the property but is now subject to a 10% inheritance tax on the amount inherited. Thus, for a house worth $300,000 the survivor owes the state of Maryland $15,000 (10% of the half inherited by the surviving spouse).

The 2009 legislation creates a class of people called “domestic partners.” Domestic partners are exempt from inheritance tax on a jointly owned primary residence. Second houses (or any other types of assets, for that matter) don’t get the exemption, only the primary residence. In addition, if only one of the domestic partners names is on the deed to the house, the exemption does not apply.

So how do people become “domestic partners?” They must be at least 18 years old and not related to one another. Their sex does not matter, they can be same sex or opposite sex couples. They must sign an affidavit indicating their agreement to be in a relationship of mutual interdependence. Attached to the affidavit must be two documents as proof of the interdependence. The types of documents that satisfy the statute are:

 

  • 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 document, and
  • relationship or cohabitation agreement.

 

The surviving domestic partner must present the affidavit and accompanying documents to the Register of Wills to be exempt from inheritance tax on the primary residence. Thus the affidavit and documents should be kept in a safe place - theoretically along with the Will and other important legal papers.

RSS

What Our Clients Say

Known for our unwavering commitment to clients, for our integrity, and for delivering the best results, our clients continue to refer their friends, families and neighbors to us for their legal needs.


"One year ago today I made the call to your office. The best decision I could make. I wanted to share with you how impressed I am with your staff and your professionalism."

Heather P.


"Craig did a great job representing me! He's the lawyer I have trusted with my legal needs because he's professional, knowledgeable, and keeps me informed about my case."

Jaclyn K.


" wanted to thank you, in writing, for your kindness and prompt response. Customer service is a dying art, and you gave me hope for my family."

Karla


"I would like to express my gratitude for your efforts and dedication for my disability case. It's has been quite a long and upsetting process but you have handled my case in an extremely competent and responsible manner."

Leo H.


"I have recommended Mr. Feldman to several of my friends and colleagues and have heard nothing but excellent reviews. He is the best lawyer I have ever used."

Martin


"I received the check today. I could not believe it until I saw the check. Thank you so much. You have improved my family's quality of life tenfold."

Mike F.


"These guys go above and beyond! They always have your best interest in mind."

Mike W.


"I would like to express my thanks to Amanda Knott and Gretchen Rogers for their patience with me through my ordeal with my workers comp claim. I was impressed from the very beginning when I spoke with G. Rogers on the phone and although she did not have to, she met with me personally and walked me through the steps of what to expect in this process."

Mr Sagal


"You have been kind throughout this process and I appreciate your professionalism as well as your gentle concern. Thanks for helping us and all the others who need your legal expertise. We are grateful."

Nancy F.


"Thanks to Mr. Shultz's aggressive and professional work ethic style I was able to receive the medical services and compensation pertaining to my case."

Navdeep C.


"I can honestly say this firm is simply TOP NOTCH! They not only have handled countless cases for my members that require their services, they also have gone well beyond their "scope" to help some of my folks in other areas of need. "

Rick H.


"I wanted to compliment your law firm on having Amanda Knott as a paralegal. She worked tirelessly for almost 2 years making sure I understood what was happening and at the same time keeping all my records straight and in order, which allowed Gretchen Rogers to represent me in the best way possibl"

Terrye G


"The attention and professional care the staff has taken toward my needs has always been excellent. I have no complaints nor worries that my issues discussed are not addressed."

Tim T.


"I just got off the phone with Craig and let him know how thankful we are to you, him and Ken for all your efforts – you are all really terrific to work with!"

Val K.


Locations Throughout Maryland & Washington DC

Gaithersburg Office

481 N. Frederick Avenue, Suite 300
Gaithersburg, MD 20877
301-670-7030 / 800-248-3352
Fax: 301-670-9492

Lutherville Office

1301 York Road, Suite 600
Lutherville, MD 21093
410-769-5400 / 800-248-3352
Fax: 410-769-9200

Frederick Office

30 W. Patrick Street, Suite 105
Frederick, MD 21701
301-668-2100 / 800-827-2667
Fax: 301-668-2000


TOP