On January 1, 2026, the current historically high federal estate and gift tax exemption, now almost $14 million per individual, is scheduled to drop by about half. This change may seem relevant only to ultra-wealthy households, but the implications reach far beyond the top 1%. Whether you own a small family business, a modest home, or have savings you want to pass on, understanding the coming changes could make a meaningful difference in how you plan your legacy.
For high-net-worth families, the 2026 sunset poses an immediate call to action. With today’s exemption set to expire, many families who would currently avoid estate taxes may suddenly find their estates subject to significant tax liability. This makes the next 12–18 months a window of opportunity to transfer assets efficiently through strategies like bypass trusts, family LLCs, or direct gifting.
But what about families with more modest estates? The truth is, federal thresholds are only one part of the picture. Maryland imposes its own estate tax, currently triggered at
$5 million per individual, and Maryland also has a 10% inheritance tax, which applies to certain heirs. If the federal exemption drops to around $6.8 million (adjusted for inflation), more estates in the mid-seven-figure range will be at risk, especially when paired with state taxes. If you own a home, retirement accounts, life insurance, or a small business, you may be closer to those thresholds than you realize.
More importantly, even families well under the taxable limits can benefit from reviewing their estate plans in light of these changes. The sunset offers a natural point in time to revisit wills, trusts, powers of attorney, and beneficiary designations. For example, are your trusts written in a way that assumes a high exemption? Could your documents become outdated or tax-inefficient under a lower threshold? Do you have clarity around how family property will be divided, or how your heirs will access funds in an emergency?
Another crucial issue is planning for blended families or aging parents. Without clarity and structure, even small estates can cause significant confusion or disputes. While estate taxes might not be the direct concern, the planning you do today can prevent unnecessary court involvement, protect beneficiaries, and preserve family harmony.
Congress may still act to change the trajectory. The “One Big Beautiful Bill Act,” introduced in 2025, proposes to make today’s higher exemption permanent. But legislative timing is unpredictable. If you're waiting for certainty, you could miss the chance to act while options are still on the table.
At Stouffer Legal, we help Maryland families of all backgrounds navigate these changes, not with alarmism, but with practical, proactive planning. Whether your estate is $20 million or $200,000, your legacy deserves the same thoughtful planning.
References
Internal Revenue Service. (2023). Estate tax. https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
Polsinelli PC. (2024). The 2026 estate tax sunsetting: Planning guidance.
Thomas, Fisher & Edwards (TF&E). (2024). Sunset of tax law: Implications for high-net-worth estates.
Maryland Comptroller's Office. (2023). Estate and inheritance tax information.
One Big Beautiful Bill Act, 2025.
