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New investment tax may affect estate administration in Maryland

Many people work hard for their money and assets and could benefit from estate planning. However, usually people are only concentrating on their daily financial circumstances and are not quite as aware of their overall financial picture. The end of the year is a good time to consider taking a look at one’s overall estate planning goals in order to ensure that any estate plan enhances financial goals. This includes considering any new laws which may have been passed that affect estate administration in Maryland.

One important change which has been recently made by lawmakers is the net investment income tax, which is levied on investment income of estates, individuals and trusts at 3.8 percent. This new tax was included in the Affordable Care Act and is aimed at helping to pay for changes in the healthcare system. The tax on investment income applies to single people with gross incomes that exceed $200,000 and married couples who file jointly and earn more than $250,000 per year.

Trusts have a lower exemption level for the new tax. Any trust which earns more than $11,650 annually will be charged the 3.8 percent tax. Additionally, a trust is taxed 20 percent for capital gains from income received via selling an asset such as corporate stocks. The new tax law also affects some small businesses.

Those who are looking to update their estate plan will want to consider the new tax on investment income. This will allow them to minimize their exposure to tax liabilities in Maryland or in any other state. However, each situation is different and based upon individual facts, which means the law needs to be applied to the circumstances of a specific case in order for a person to make the best estate administration decisions.

Source: Richmond Times-Dispatch, Time to check the list for financial and estate planning goals, Carol Hazard, Dec. 15, 2013


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