A fiduciary is a person who holds the legal title to real or personal property for the use and benefit of another, and includes a personal representative of a decedent's estate or a trustee of a testamentary or inter vivos trust ("living trust").
Fiduciaries are subject to the Maryland income tax and, dependent upon residency of the decedent, also either the local income tax rate or the special nonresident tax rate.
A fiduciary is subject to the local income tax, if the fiduciary is considered a Maryland resident. A fiduciary of an estate is a Maryland resident if the decedent of the estate was domiciled in Maryland on the date of the decedent's death.
A fiduciary of a trust is a Maryland resident if:
- the trust was created, or consists of property transferred, by the will of the decedent who was domiciled in Maryland on the date of the decedent's death.
- the creator of grantor of the trust is a current Maryland resident; OR
- the trust is principally administered in Maryland.
If none of the above is applicable, then the fiduciary is considered a nonresident and is subject to the Maryland special nonresident tax.
Maryland follows the federal income tax treatment for fiduciaries of trusts and estates. Under the federal income tax rules, generally any income that is distributed by the fiduciary of the trust or estate during the tax year is not taxable to the trust or estate. Instead, that income is taxable to the beneficiary. Any income not distributed or partially distributed by the fiduciary of the trust or estate during the tax year is taxable to the fiduciary of the trust or estate.