If you're an estate planning attorney in Maryland, you know the drill. You drafted the will or trust beautifully. You walked the family through the probate process. You advised on asset titling and charitable bequests. Then someone asks: "Who's filing the 706?"
And maybe you can prepare it. Maybe you used to. But increasingly, the smart move is to refer that work to a CPA who specializes in estate and trust tax compliance — and to do it before the deadline panic starts.
Here's why, what you should know about Forms 706, 709, and 1041, and how a clean attorney–CPA partnership protects your clients and your practice.
Three trends in the last decade have made the tax-compliance side of estate work harder for general estate planning practices to handle in-house:
1. Form complexity has increased. Schedule M elections, portability questions, basis step-up reporting, and DSUE calculations have become more technical. The IRS has also been more aggressive about reviewing 706 filings, especially around hard-to-value assets like closely-held businesses, real estate, and intellectual property.
2. Software costs and learning curve are real. Maintaining a proper 706 / 1041 software subscription (ProSeries Fiduciary, Lacerte, BNA, etc.) and staying current on the rules is genuinely expensive for an attorney's office that may only file a handful of returns per year.
3. Malpractice exposure on the tax side is its own animal. Most attorney malpractice carriers price tax-preparation work differently from legal work. Filing a deficient 706 isn't just a tax problem — it can create personal liability for the executor and trustee, which leads to claims against the preparer.
A reliable CPA partner solves all three problems. You stay in your wheelhouse (legal). They stay in theirs (tax). Your clients get specialists on both sides. And your malpractice profile gets cleaner.
The rest of this post covers the three key federal forms that come up most often in Maryland estate practice, plus the Maryland-specific filings that go with them.
Form 706 is the federal estate tax return. It's required when a decedent's gross estate plus adjusted lifetime taxable gifts exceeds the federal estate tax exemption in effect on the date of death.
Filing threshold (verify current year): The federal exemption has changed several times in the last decade.
Even when not required, 706 may be advisable. Surviving spouses often want to elect portability of the deceased spousal unused exclusion (DSUE). To preserve that election, you must file a 706 timely — even if the estate is well under the filing threshold. This is one of the most common reasons we get late-stage panic calls from attorneys: a surviving spouse needs the DSUE election preserved, and the original CPA didn't file because "nothing was owed."
Filing deadline: 9 months from the date of death, with one automatic 6-month extension available (Form 4768). Missing the original deadline doesn't kill the return, but it can compromise certain elections (notably the alternate valuation date election and the portability election if you're past the late filing relief window).
Maryland's separate estate tax. Maryland is one of the few states that still imposes its own estate tax in addition to the federal regime. The Maryland exemption is $5 million per decedent (for deaths in 2019 and after), and the top Maryland rate is 16%. If a decedent's Maryland-situated estate exceeds $5M, Maryland Form MET-1 is required even if the estate is well below the federal threshold. Many estates owe Maryland estate tax while owing zero federal estate tax. Easy thing to overlook.
Form 709 is the federal gift tax return. It's required when a donor makes gifts to a single recipient in a calendar year that exceed the annual gift tax exclusion — or whenever any gift of a "future interest" is made, regardless of amount.
Annual exclusion (verify current year): The annual exclusion was $18,000 per recipient in 2024 and $19,000 in 2025.
Maryland has no separate gift tax. This is one of the few areas where Maryland tax planning is simpler than federal. Lifetime gifts that exceed the federal exclusion file a federal 709, but no Maryland return is required for the gift itself. However, those gifts will count when calculating the Maryland estate tax at the donor's eventual death.
Filing deadline: April 15 of the year following the gift, with automatic extension available alongside a Form 4868 personal return extension.
Where things get expensive when not done right: Failing to file a 709 doesn't just risk penalties — it can compromise valuation positions. The IRS three-year statute of limitations on gift tax doesn't begin until a properly filed 709 is submitted. An unfiled 709 leaves the IRS able to challenge the gift's reported value indefinitely. That's the kind of thing estate attorneys learn about after the fact, when their client's heirs face a surprise valuation adjustment 15 years later.
Form 1041 is the federal income tax return for estates and trusts. Unlike the 706 (filed once after death) and the 709 (filed when a gift triggers it), the 1041 is an annual filing requirement during the period an estate is being administered or a trust is in existence and generating taxable income.
Maryland counterpart: Maryland Form 504 is the state fiduciary income tax return. Filed on a similar schedule as the federal 1041.
This is recurring annual work that benefits both the attorney (consistent client touchpoint without billable tax work) and the CPA (year-over-year relationship with the trustee).
A few Maryland angles that affect almost every estate engagement:
Maryland inheritance tax (separate from estate tax). Maryland is one of only six states that still imposes an inheritance tax. It applies at a 10% rate to property passing to most non-exempt beneficiaries. Key exemptions: spouses, children, parents, siblings, grandparents, lineal descendants, charities, and a few others. Property passing to nieces, nephews, friends, or unmarried partners triggers the 10% inheritance tax. This is in addition to the Maryland estate tax (if any). Both can apply.
Maryland portability does not exist. Unlike the federal regime, Maryland does NOT allow portability of one spouse's unused estate tax exemption to the surviving spouse. This makes credit shelter trust planning at the Maryland level still relevant even though federal portability has reduced the need for it. Coordinating Maryland and federal exemption planning is one of the higher-value services a CPA-attorney team can provide.
Maryland fiduciary income tax brackets track Maryland personal income tax brackets, with the top rate at 5.75% (state) plus the trust's "applicable" county rate — which for trusts is typically the situs county or Maryland-administered fiduciary rate.
Frederick County agricultural estates. Family farm estates in Frederick, Carroll, and surrounding counties can qualify for Section 2032A special-use valuation, reducing federal estate tax by valuing farmland at its agricultural use rather than highest-and-best-use. This is a real planning opportunity that requires careful coordination between the attorney drafting the estate plan and the CPA filing the 706.
The best attorney-CPA partnerships work because the roles are clearly defined and neither side encroaches on the other.
We've worked with attorneys across Frederick County and central Maryland for decades. The partnerships that work best are ones where both sides communicate clearly, where each professional respects the other's expertise, and where neither attempts to do the other's job.
Most CPA firms accept estate and trust work but treat it as secondary to their bread-and-butter 1040 and business tax practice. Estate and trust work is a genuine specialty for us. Established in 1971, we've handled thousands of fiduciary tax engagements across Maryland.
If you're an estate planning attorney in Frederick County, Montgomery County, or anywhere in central Maryland — and you'd like to discuss a referral partnership — we'd welcome the conversation.
Schedule a meeting with our team or call us at 301-662-6992.
We're happy to start with a no-obligation introductory call where we share how our practice handles 706, 709, and 1041 work and learn about your firm's preferred referral process. References from current attorney partners available on request.
Mercer Flanagan & Company has been preparing Maryland estate and trust tax returns since 1971. We serve estate planning attorneys, fiduciaries, executors, and beneficiaries across Frederick County, Montgomery County, and central Maryland. Lorraine Nagy, CPA leads our estate and trust tax practice and brings over 30 years of specialized experience in fiduciary taxation.
This post is general information and not legal or tax advice. Specific situations should be evaluated by qualified professionals. Tax law changes annually and key thresholds, exemptions, and rates referenced in this post should be verified against current-year figures before relying on them.