Claiming Maryland Estate Tax Portability (DSUE) for Surviving Spouses
Surviving spouses in Maryland can use the Deceased Spousal Unused Exclusion (DSUE) to shield up to $10 million from state estate taxes. To claim this benefit, the executor must file the Maryland Estate Tax Return within nine months for mandatory filings, though estates filing solely for portability have up to five years from the date of death.
When a spouse passes away, the last thing a grieving widow or widower wants to think about is estate taxes. However, acting quickly to secure your financial future is critical. In Maryland, state law provides a powerful tool to protect family wealth known as portability. By properly claiming the Deceased Spousal Unused Exclusion (DSUE), a surviving spouse can effectively double the amount of money they can pass on to their children tax-free.
Failing to claim portability is a common, yet incredibly costly, mistake. Many families assume that because the first spouse's estate was relatively small, no paperwork is necessary. Unfortunately, skipping this step means losing out on millions of dollars in tax exemptions. The rules are strict, and the deadlines are unforgiving. You can easily find a qualified local probate and tax lawyer through our US Attorney Directory to handle this complex filing for you.
What is Deceased Spousal Unused Exclusion (DSUE)?
Under Md. Code Ann., Tax-Gen. § 7-309(b)(9), Maryland allows for the portability of the state estate tax exemption. Currently, every individual in Maryland has a $5 million exemption. If a husband passes away and leaves everything to his wife, he uses $0 of his exemption because transfers to a U.S. citizen spouse are completely tax-free under the marital deduction.
Without portability, that $5 million exemption would simply disappear. However, by claiming the DSUE, the wife can 'port' or transfer her deceased husband's unused $5 million to herself. This means when she eventually passes away, she will have her own $5 million exemption PLUS her husband's $5 million, allowing her to pass up to $10 million to her heirs completely free of the Maryland estate tax.
Timeline for Filing the Maryland Estate Tax Return
Portability does not happen automatically. To claim the DSUE, the executor of the deceased spouse's estate must actively elect it by filing Form MET-1, Maryland, Comptroller of Maryland, Maryland Estate Tax Return with the Comptroller of Maryland, Annapolis.
For estates required to file because their gross assets exceed the statutory exclusion amount, Form MET-1 must be filed within nine months of the date of death, though a six-month extension can be requested using Form MET-1E, Maryland, Comptroller of Maryland, Application for Extension of Time to File the Maryland Estate Tax Return before the deadline. However, when an estate's total value is under the threshold (for example, an estate worth $500,000 owing no tax) and the return is filed solely to elect portability, Md. Code Ann., Tax-Gen. § 7-305(c)(1) aligns the state deadline with the federal election period. Under IRS Rev. Proc. 2022-32, qualifying portability-only returns may be submitted up to five years after the decedent's date of death without filing Form MET-1E.
Federal vs. Maryland Portability Rules
It is vital to understand that federal and state portability elections are separate processes. The IRS requires the filing of Form 706, FED, IRS, United States Estate (and Generation-Skipping Transfer) Tax Return to claim the federal DSUE. Simply filing the federal return does not secure your Maryland DSUE. You must explicitly file the state-level Form MET-1. Depending on the size of the estate, you may need to file both the federal and state returns to maximize your overall tax protection.
Scenarios Involving Multiple Marriages
Portability rules become highly complex if the surviving spouse remarries. In general, a person can only use the DSUE of their most recently deceased spouse. If a widow ports $5 million from her first husband, remarries, and then her second husband passes away leaving no unused exemption, she loses the original $5 million DSUE from her first marriage. Consulting an attorney to create specialized trusts can help preserve exemptions in blended family situations.
How to Successfully File for Portability
Filing a complete Maryland Estate Tax Return requires gathering comprehensive financial documentation. The executor must provide certified appraisals for real estate, business valuations, and statements for all investment accounts to accurately establish the deceased spouse's gross estate value. These documents are submitted directly to the Comptroller of Maryland, Annapolis. Because of the sheer volume of financial data required, hiring an experienced attorney helps ensure that assets are accurately reported and the DSUE election is properly submitted.
Frequently Asked Questions (FAQ)
Do I have to file a tax return to get portability if no tax is owed?
Yes. The only way to legally claim the Deceased Spousal Unused Exclusion (DSUE) in Maryland is to file Form MET-1, Maryland, Comptroller of Maryland, Maryland Estate Tax Return, even if the estate falls well below the $5 million threshold and owes zero taxes.
What is the deadline to claim portability in Maryland?
For estates required to file, the Maryland Estate Tax Return must be filed within nine months of death (with an available six-month extension). However, if the return is filed solely to claim portability when no tax return is otherwise required, Md. Code Ann., Tax-Gen. § 7-305(c)(1) and IRS Rev. Proc. 2022-32 allow up to five years from the date of death.
Can a non-citizen surviving spouse claim portability?
The rules for non-citizen spouses are highly restrictive. Typically, assets must be placed into a Qualified Domestic Trust (QDOT) to defer estate taxes, and standard portability rules generally do not apply in the same way.
Does claiming Maryland portability also claim federal portability?
No. You must file two separate returns: the Maryland MET-1 for state portability and the Form 706, FED, IRS, United States Estate (and Generation-Skipping Transfer) Tax Return for federal portability.
What happens if we miss the 9-month filing deadline?
If the estate was required to file and missed the nine-month deadline without an extension, you generally forfeit the right to claim DSUE. However, if the estate was below the filing threshold and filing solely for portability, you can still elect portability within five years of the decedent's death under Md. Code Ann., Tax-Gen. § 7-305(c)(1) and IRS Rev. Proc. 2022-32.
No reviews yet. Be the first to share your experience!