One of the most frequent topics of conversation among estate planning attorneys in recent years (yes, we are sometimes boring) has now been resolved.
On December 31, 2025, like Cinderella’s coach turning into a pumpkin, the federal estate tax exemption was scheduled to nearly halve.
This would have caused a frenzy of urgent planning in Q4 to take advantage of the high federal estate tax exemption before it sunset.
In our June 2025 client newsletter, we spotlighted proposed changes to the federal estate tax exemption under the “One, Big, Beautiful Bill” (the “Bill”). Notably, we correctly predicted what would happen next.
Remind Me Again, What is the Estate Tax and the Estate Tax Exemption?
Estate tax is a tax that is assessed on the post-death transfer of wealth.
The estate tax exemption refers to the amount of wealth that can be transferred tax-free.
There is an unlimited exemption (called the “marital deduction”) for transfers to a surviving spouse. There is also an unlimited exemption (called the “charitable deduction”) for transfers to not-for-profit entities.
Thus, for the nuclear family, the estate tax can become a concern at the second parent’s death, when wealth flows to the next generation.
So, Where Do Things Stand Now?
With the passage of the Bill, the federal estate tax exemption has been set at $15,000,000.00 per person. This amount will increase each year, tied to inflation.
Under the doctrine of portability, provided a surviving spouse files a protective estate tax return for their deceased spouse, and provided the surviving spouse does not remarry, the surviving spouse receives his/her $15,000,000.00 exemption, plus any amount of the deceased spouse’s exemption which was not consumed.
As such, a couple can leave up to $30,000,000.00 exempt from federal estate tax, provided the surviving spouse files a protective estate tax return and does not remarry.
What Goes Up Might Come Down.
Remember that aspects of the Bill may always be susceptible to repeal.
If, as some budget pundits predict, the consequences of the Bill are to place the country in an unmanageable debt, Congress could always repeal the Bill, in whole or in part.
Moreover, changing political winds in Washington can always bring new tax policies.
Don’t Forget About State Estate Tax
Maryland and the District of Columbia are 2 of the 13 jurisdictions in the United States that assess estate tax at the state level. Both Maryland and the District of Columbia have far more aggressive estate tax exemptions (but with far lower estate tax rates).
Maryland’s estate tax exemption presently sits at $5 million per person. Portability is available in Maryland so that married couples can pass up to $10 million.
The District of Columbia estate tax exemption presently sits at $4,873,200.00 per person. Notably, there is no portability in the District of Columbia.
How can we help you create a new estate plan or adjust your existing estate plan for life’s changes? Contact Jeremy Rachlin or Liz Farley to schedule a new client appointment or a review appointment!
