Final 1040s, estate income returns, Maryland's two-layer estate and inheritance taxes, and the elections families miss — handled by a CPA who sits on the executor's side of the table, alongside your probate attorney.
When someone dies in Maryland, the person handling the estate inherits a stack of tax obligations nobody explains at the funeral home. Depending on the estate, that stack can include: the decedent's final Form 1040 (income up to the date of death), the estate's own income tax return (Form 1041) for income earned after death — the interest, dividends, rent, and sale proceeds that keep arriving while the estate is open — a Maryland estate tax return if the estate exceeds Maryland's $5 million exemption, Maryland inheritance tax filings through the Register of Wills for certain heirs, and a federal estate tax return (Form 706) for estates over the $15 million federal exemption — or, importantly, by election for far smaller estates (more on that below).
We prepare these returns and sit on the executor's side of the table the whole way: getting the estate its EIN, coordinating with the probate attorney and the Register of Wills, and keeping you — the personal representative — personally protected, because an executor who distributes assets before taxes are settled can be personally liable for the shortfall.
Maryland is one of the only states with both an estate tax and an inheritance tax. The estate tax kicks in above $5 million — a threshold that is not indexed for inflation and sits far below the federal $15 million, meaning a Baltimore family with a house, retirement accounts, and a business can owe Maryland estate tax (top rate ~16%) while owing the IRS nothing.
The inheritance tax works differently: it's 10% of what a non-exempt heir receives, regardless of estate size. Spouses, children, grandchildren, parents, grandparents, siblings, and charities are exempt — but nieces, nephews, cousins, friends, and unmarried partners are not. An aunt leaving $200,000 to a niece triggers $20,000 of inheritance tax on an estate the estate tax ignores entirely. Which heirs inherit what is a tax decision, not just a sentimental one.
The portability election most families miss: when the first spouse dies, filing Form 706 — even though no tax is due and none would ever be — preserves the deceased spouse's unused federal exemption for the survivor. It's optional, it has a deadline, and skipping it can cost a family millions in exemption later. If your spouse died recently, this is worth a conversation now.
Inherited assets receive a step-up in basis to date-of-death value — which means someone has to establish and document what everything was worth on that date: the house (including the renovation history that a future sale will be measured against), the brokerage account, the business interest. Do it carefully now and heirs sell later with little or no capital gain; do it sloppily and the family fights the IRS about a dead person's records. Substantiating fair market value is half of what we actually do in estate engagements.
For trusts, the work continues annually: irrevocable trusts and estates that stay open file Form 1041 each year, issue K-1s to beneficiaries, and face compressed tax brackets that reward proactive distribution planning.
Most engagements start with one conversation and the estate inventory. From there you get a map — which returns are required, which elections deserve consideration, what the deadlines are — and a flat fee in writing. We work alongside your probate attorney (or can suggest one), handle the filings, and stay through the estate's closing. Recent engagements have ranged from a single fiduciary income return to multi-year estates with property sales, renovations to substantiate, and out-of-state filings. Handled virtually or in person, in Maryland and beyond — see also gift tax returns, since lifetime giving and estates are two chapters of the same plan.
My parent just died. What tax returns are needed?
Typically: their final Form 1040 for the year of death; a Form 1041 for income the estate earns while it's open; a Maryland estate tax return only if the estate exceeds $5 million; and inheritance tax filings only for non-exempt heirs. One conversation with the estate inventory settles exactly which apply.
Do I need to worry about estate tax if the estate is under $5 million?
Not the tax itself — but possibly the portability election (filing Form 706 to preserve a deceased spouse's federal exemption), Maryland inheritance tax if non-exempt relatives inherit, and the income tax returns, which apply to estates of any size.
Who pays Maryland inheritance tax?
Non-exempt heirs — nieces, nephews, cousins, friends, unmarried partners — pay 10% of what they receive. Spouses, children, grandchildren, parents, grandparents, siblings, and charities are exempt.
Can the executor be personally liable for the estate's taxes?
Yes — a personal representative who distributes assets before tax obligations are satisfied can be held personally liable for unpaid amounts. It's the single best reason to map the tax picture before distributing anything.
Do you replace the probate attorney?
No — we handle the tax side and work alongside your attorney, who handles the legal administration. Most estates need both, and the engagement is smoother when they talk to each other.
Bring the estate inventory — even a rough one — and we'll tell you which returns apply, what the deadlines are, and what it costs.