Done just in time for July 4th, the recently enacted “One Big Beautiful Bill” brings significant changes to federal estate, gift, and generation-skipping transfer tax laws. Effective January 1, 2026, the federal exemption amounts for these taxes will increase to $15 million per individual and $30 million for married couples, with annual adjustments for inflation thereafter. This “permanent” increase replaces the previous provisions under the Tax Cuts and Jobs Act (TCJA) of 2017, which had temporarily doubled the exemption amounts but were set to expire at the end of 2025. Without the change, the exemptions would have reverted to approximately $7 million per individual or $14 million for married couples. Of course, a change to federal law is only “permanent” for as long as it has not been changed another law, but it is significant that this increase comes without a sunset provision. Families should now be able to plan with greater confidence into the future for these exemption numbers.
Implications for Estate Planning
The higher exemption amounts provide an opportunity for individuals and families to transfer more wealth without incurring federal estate, gift, or GST taxes. However, it’s important to note that the top tax rate for amounts exceeding the exemption remains at 40%. While the federal exemptions have increased, Maryland’s estate and inheritance tax laws remain unchanged. Maryland imposes an estate tax on estates exceeding $5 million and an inheritance tax on certain beneficiaries, regardless of the estate’s size. Maryland’s governor proposed several changes to these taxes this year, including elimination of the inheritance tax and reducing the estate tax exemption to $2 million for individuals and $4 million for married couples, but those changes were not adopted by the Maryland legislature. Maryland remains the only state with both inheritance and estate taxes.
Action Steps
Given these changes, we recommend the following:
-
Review Your Estate Plan: Ensure your current estate plan aligns with the new federal exemption amounts and considers Maryland’s unique tax laws.
-
Utilize Gifting Strategies: Consider making lifetime gifts to take advantage of the increased exemptions.
-
Consult with Professionals: Work with estate planning attorneys and financial advisors to develop strategies that minimize tax liabilities and achieve your wealth transfer goals.
At Downs Law Firm, we are committed to helping you navigate these changes and optimize your estate planning. Contact us to schedule a consultation and discuss how the new law impacts your estate plan.
This article is for informational purposes only and does not constitute legal advice. Please consult with a qualified attorney for personalized guidance.