During your initial consultation with an estate planning attorney, the questions usually revolve around your family. Are you married, single, divorced, or widowed? Do you have any children? Are there any other relatives that may be involved in your planning? The reasoning behind these questions is that a person’s relationship to a decedent determines a variety of different legal outcomes. For example, spouses are treated favorably for estate taxes.
In 2023, Maryland passed a new law that changed the legal relationship for domestic partners. This is significant because we now have a definition of domestic partners and how that relationship affects certain rights after one’s domestic partner passes away.
A domestic partner is defined as “in a relationship of mutual interdependence where each contributes to the maintenance and support” of the partnership. For the legal relationship to be established, the partners must register per Estate and Trusts Article Section 2-214.
If partners are registered a few estate planning rights are conferred:
- No inheritance tax: In Maryland, there is a 10% inheritance tax for anyone who is not a spouse, child, grandchild, parent, grandparent, or sibling. This domestic partnership law allows the registered partner to avoid that 10% tax without marriage.
- The partner is treated the same as a spouse for intestate succession and spousal allowance. If someone dies without a will, the state intestacy laws control the disposition of their assets. Under these laws, spouses take priority over any other family members. A registered domestic partner will now be treated the same as a spouse for the intestate succession.
One major note is that there is no unlimited marital deduction for domestic partners. What this means is that for married couples, you can leave your spouse an unlimited amount of money estate tax-free. This allows for certain estate tax planning strategies to be used to double any applicable estate tax exclusion. However, the domestic partnership law does not extend this right to registered domestic partners. This means that if the deceased domestic partner’s estate exceeds the estate tax exemptions, the surviving domestic partner will owe an estate tax.
The domestic partnership can be terminated by a Declaration of Termination under the new law.
When meeting with your estate planning attorney, it is important to disclose your relationships and ask whether or not this new law may apply to you and the advantages of registering as a domestic partner.