Seize the Moment: Maximizing Your Estate Planning Before 2026

Date: May 28, 2024
By: Brett Baldino

In a significant legislative shift, the Tax Cuts and Jobs Act of 2017 doubled the exemption amounts for estate, gift, and generation-skipping transfer taxes (collectively known as “Death Taxes”). As of 2024, the federal exemptions stand at $13.61 million per individual and $27.22 million per married couple. This means that estates falling below these thresholds are currently shielded from federal Death Taxes—an unprecedented opportunity that will only last through December 31, 2025.

What’s Next?

However, this window is rapidly closing. Absent further legislation, the elevated exemptions will revert to 2018 levels on January 1, 2026. This means the exemption amounts will drop to approximately $7 million per individual and $14 million per married couple. Consequently, many more families will be exposed to the hefty 40% Death Tax rate on all assets above the exemption amounts post-2025.

Meanwhile, the Maryland estate tax exemptions remain at $5 million per person and $10 million per married couple, with no anticipated changes in 2026. Maryland’s estate tax is assessed separately from federal taxes at a rate of 14-16%.

Limited Window for Planning Opportunities

We are currently experiencing the highest exemption levels in history, offering families a rare chance for strategic estate planning. Failing to utilize these exemptions before the end of 2025 means missing out on a potentially once-in-a-generation tax planning opportunity. This is particularly critical for families whose estates might grow beyond the 2026 thresholds of $7 million per person and $14 million per couple in the future after the exemptions have dropped.

Families should consider taking advantage of the current exemptions by making strategic gifts to children, grandchildren, or charities, either outright or through trusts, before 2026. Additionally, existing Wills and Revocable Trusts should be reviewed. Many estate plans include trusts, such as “Credit Shelter Trusts” or “Bypass Trusts,” which are funded based on the exemptions in effect at the time of death. Given the impending fluctuation in exemptions, the actual funding of these trusts could deviate significantly from a grantor’s original intentions.

Act Now: Craft a Customized Plan

Developing a finely tuned estate plan that achieves tax savings, while fulfilling family goals, requires time and expert advice. It is crucial to review and implement these plans well before the 2026 deadline.

To explore the strategies available for leveraging the current exemptions, reach out to our wealth planning department or directly to Brett Baldino. Don’t miss this historic opportunity to preserve the wealth you have worked so hard to create and secure your family’s financial future.