2026 Annual Estate Planning Update

At this time each year, we like to remind our clients to review their existing estate plans and consider whether any changes to their current plans are needed.

In general, we recommend that you undertake at least a cursory review of your estate plan on an annual basis.  We recommend an in-depth review if there have been changes in your personal or financial circumstances, or if your goals for the distribution of your assets have changed since your current estate plan was developed.  If you’re a business owner, it’s a good idea to evaluate succession plans annually as well.

Here are a few examples of personal and financial changes that could impact your estate planning:

Changes to federal and state laws can also affect your estate plan. Below is a brief summary of some features of federal and Maryland law and new developments that you should consider in evaluating your current estate plan:

As you may recall from our previous annual updates, on January 1, 2026 the federal estate and gift tax exemption of $13.99 million was expected to “sunset” back to $5 million (indexed for inflation to about $7 million) in the absence of further action by Congress.

However, in 2025 Congress passed a new federal law that increased the lifetime federal estate and gift tax exemption to $15 million per person effective January 1, 2026, thereby eliminating the scheduled “sunset”. This means that an individual can transfer up to $15 million through lifetime gifting or upon their death free from federal estate and gift tax.  The exemption will be adjusted annually for inflation.

Currently, property left to a surviving spouse, no matter what the amount, is still completely exempt from Maryland and federal estate taxes (provided the surviving spouse is a U.S. Citizen).

Also, at the state and federal levels, a surviving spouse can “port” the unused portion of their deceased spouse’s exemption, provided a portability election is properly made following the death of the first spouse to pass.  In order to elect portability, the deceased spouse’s estate must timely file a federal estate tax return making that election (even if no estate tax is due on the deceased spouse’s estate).

The federal annual gift tax exclusion remains at $19,000 in 2026. You can make gifts of up to $19,000 to an unlimited number of people this year with no gift tax consequences. Married couples can combine this exclusion and give gifts of up to $38,000 to each recipient. Annual gifts that do not exceed the $19,000 threshold do not count toward the current $15 million individual lifetime estate and gift tax exemption.

For 2026, the Maryland estate tax exemption will remain at $5 million per person, not indexed for inflation. Consequently, Maryland residents whose estates exceed $5 million may owe no federal estate tax but could face substantial estate tax liability at the state level.

With that said, Maryland does not impose a gift tax and therefore does not count the value of lifetime gifts against a person’s estate tax exemption. For clients whose estates may exceed the Maryland exemption amount, lifetime gifting could be an effective means to reduce an estate below the exemption amount and avoid estate tax liability.

Maryland is the only state that imposes both an estate tax and an inheritance tax. The ten percent (10%) inheritance tax rate remains unchanged for 2026. Property passing from a decedent to most close relatives is exempt from inheritance tax, but more distant relatives, such as nieces and nephews, and friends, are subject to the tax. Some relief is available to estates subject to both the inheritance tax and estate tax. The Maryland estate tax is reduced, dollar for dollar, by the amount of the inheritance tax due.

Maryland’s spousal elective share law protects a surviving spouse from disinheritance by giving a surviving spouse the right to elect to receive a minimum portion of their deceased spouse’s estate. Under current law, the spousal elective share extends to the deceased spouse’s “augmented estate” – which includes both probate assets (such as assets passing under the deceased spouse’s will or through intestate succession) and non-probate assets (such as life insurance, retirement accounts and assets in a revocable living trust).

Since 2023, Maryland law has permitted any two unmarried adults to become registered domestic partners by filing a Declaration of Domestic Partnership with the Register of Wills in the county where they reside. When one domestic partner passes away, the registration entitles the surviving domestic partner to significant financial and other benefits if their partner dies intestate (without a will). The registration also exempts the surviving domestic partner from Maryland’s 10% inheritance tax on any assets they inherit from their deceased partner.

If it’s been a while since you’ve reviewed your current estate plan, or if you have questions about the information in this notice, please give us a call. We’d be happy to meet with you at your convenience.