How to Inherit Bank Accounts in Maryland

Inheriting bank accounts in Maryland involves specific state laws, probate procedures, and potential tax obligations.

This comprehensive guide explains how different types of accounts are handled and what beneficiaries need to know about the inheritance process.

Account Types and Transfer Methods

Individual Accounts

Individual bank accounts typically must go through probate in Maryland.

The personal representative must file the will with the Register of Wills in the county where the deceased person lived.

The court then grants authority to access and distribute these accounts through Letters of Administration.

Joint Accounts

Joint accounts with rights of survivorship automatically pass to the surviving owner without probate.

However, the survivor must still provide the bank with a death certificate and valid identification to remove the deceased's name from the account.

Payable on Death (POD) Accounts

POD accounts bypass probate and transfer directly to named beneficiaries.

Beneficiaries must present the death certificate and identification to the bank to claim these funds.

Maryland law recognizes POD designations as valid transfer-on-death instruments.

Maryland Probate Process

Small Estate Administration

For estates valued under $50,000 ($100,000 if the spouse is the sole heir), Maryland offers simplified probate procedures. The process requires:

• Filing a small estate petition
• Submitting the death certificate
• Providing the original will if one exists
• Paying a nominal filing fee

Regular Estate Administration

Estates exceeding the small estate threshold require full probate administration:

• Appointment of personal representative
• Asset inventory filing
• Notice to creditors
• Regular accounting to the court
• Final distribution approval

Tax Implications

Maryland Inheritance Tax

Maryland imposes an inheritance tax of 10% on assets passing to non-exempt beneficiaries. However, the following recipients are exempt:

• Spouse
• Children (including stepchildren and former stepchildren)
• Parents
• Grandparents
• Siblings
• Grandchildren

Estate Tax Considerations

Maryland estate tax applies to estates exceeding $5 million (2024 threshold). Key points include:

• Progressive tax rates up to 16%
• Marital deduction for surviving spouses
• Portability of unused exemption amounts
• Credit for inheritance taxes paid

Federal Estate Tax Impact

Federal estate tax applies to combined assets exceeding $13.61 million (2024 threshold):

• Rates range from 18% to 40%
• Unlimited marital deduction available
• Annual exclusion gifts can reduce taxable estate
• Generation-skipping considerations for grandchildren

Required Documentation

Essential Papers

To claim inherited bank accounts, prepare:

• Certified death certificate
• Letters of Administration (if probate required)
• Government-issued photo ID
• Social Security card or tax ID number
• Court orders (if applicable)

Additional Requirements

Banks may request:

• Affidavit of domicile
• Tax waivers
• Previous bank statements
• Account ownership documents
• Beneficiary designation forms

Special Circumstances

Multiple Beneficiaries

When multiple heirs inherit an account:

• Written agreements among beneficiaries may be required
• Account splitting procedures vary by bank
• Separate tax ID numbers might be needed
• Distribution documentation becomes essential

Out-of-State Accounts

For accounts held outside Maryland:

• Ancillary probate might be necessary
• Additional state tax obligations may apply
• Interstate banking regulations affect transfers
• Multiple state inheritance laws may interact

Time Considerations

Bank Processing Timelines

Account access typically requires:

• 2-3 business days for death certificate verification
• 1-2 weeks for POD account transfers
• 30-60 days for probate account releases
• Additional time for complex estates

Statute of Limitations

Maryland law provides specific timeframes:

• 6 months for creditor claims
• 9 months for inheritance tax filing
• 9 months for Maryland estate tax returns
• 3 years for federal estate tax audits

Financial Planning

Immediate Steps

Upon inheriting bank accounts:

• Establish separate estate account if needed
• Document all transactions
• Maintain accurate records for tax purposes
• Consider professional financial advice

Long-term Considerations

Plan for:

• Investment strategies for inherited funds
• Tax-efficient account management
• Estate planning for future generations
• Regular review of financial objectives