The 2026 legislative session has ended in Annapolis.
There are several new laws coming to Maryland governing estates and trusts that you should know about and perhaps take action!
Most Importantly, There Was No Change To Maryland Estate Tax
In the face of a bleak economic outlook stemming from devastating cuts to federal jobs, many individuals feared that the Maryland legislature might seek to raise revenue by reducing the state estate tax exemption.
In an election year, however, the legislature showed little appetite to add taxes. The Maryland estate tax exemption remains at $5 Million. There remains an unlimited marital exemption and portability to a surviving spouse of a deceased spouse’s unused exemption, meaning that many families can continue to pass up to $10 Million free of estate tax to the next generation.
It Is Easier to Transfer Vehicles and Boats Free From Probate
Maryland is one of the few states that permit individuals to transfer vehicles to a designated “transfer on death” beneficiary. This helpful tool allowed vehicle owners to transfer vehicles outside of the court-supervised probate process.
Currently, there are limitations on these transfers. You cannot transfer a jointly-owned vehicle by beneficiary designation. Nor can you transfer a boat by beneficiary designation.
Gone are these restrictions. Effective October 1, 2026, jointly owned vehicles and boats can be transferred outside the probate process by a “transfer-on-death designation,” provided there is no lien on the vehicle or vessel. For vehicles, the transfer-on-death designation can be done by completing a simple form on the MVA website and paying a filing fee.
It May Become Easier to Transfer Real Estate Free From Probate
Effective October 1, 2026, Maryland will recognize “transfer on death deeds”. These deeds, when filed with Land Records, will designate a “transfer on death beneficiary” who will receive real estate owned by an individual upon their death.
Currently, living trusts are the only way to pass real estate on to the next generation free from probate.
However, it remains to be seen just how effective transfer on death deeds will be. The District of Columbia has recognized transfer on death deeds for several years.
In reality, however, transfer on death deeds have several limitations. First, title companies can refuse to ensure the ultimate sale of properties that were previously passed by transfer on death deed.
Second, transfer on death deeds are not effective to transfer properties that are encumbered by a mortgage.
Until it becomes clear that Maryland real estate transferred by transfer-on-death deeds can be sold by beneficiaries without complications, we will continue to recommend living trusts to clients who wish to transfer real estate without the need for probate.
It Is Harder to Make a Trust “Challenge-Proof”
An “in terrorem clause” is a provision in an estate planning document that automatically disinherits any individual who contests any provision of the document.
Under the current law, in terrorem clauses are presumptively invalid in a last will and testament if there is “probable cause” to challenge the will. The courts have construed the “probable cause” test as a low bar.
However, there is no companion law that dictates that in terrorem clauses are presumptively invalid in trusts, meaning that even if there was probable cause to challenge a trust, an in terrorem clause would disinherit anyone who asserted a challenge.
Effective July 1, 2026, in terrorem clauses contained in trusts, like in terrorem clauses contained in wills, will be presumptively invalid if there is probable cause to challenge the trust.
Going forward, in terrorem clauses at best will have deterrent value but will have no real enforcement power. Drafting attorneys will need to take extra caution where the client’s capacity is at all in question or the terms of a trust make it more likely the trust will be challenged.
If You are a Non-Citizen, Non-Permanent Resident, You May Now Be Eligible to Administer a Family Member’s Estate
Previously, non-citizen, non-permanent residents were disqualified from serving as Personal Representatives (Executors) of Maryland probate estates. In suburban Maryland, there are literally thousands of individuals who are ineligible to manage a probate estate of a spouse or family member.
Beginning October 1, 2026, non-citizen, non-permanent residents may be eligible to serve as Personal Representative of a family member’s Maryland probate estate, provided the individual is “domiciled” in the United States. Usually, this means an individual who is living in the United States without a present intention to leave.
How can we help you update your estate plan or administer a loved one’s estate? Contact Jeremy Rachlin at (301) 656-1177 x305 or jrachlin@bulmandunie.com or Liz Farley at (301) 656-1177 x316 or lfarley@bulmandunie.com.
