UPDATE on June 10, 2025: Since the publication of the article below, some tax law changes proposed by Governor Wes Moore were not ultimately enacted: the Maryland estate tax exemption remains at $5 million, and the Maryland 10% inheritance tax remains in effect. Despite the higher exemption being retained, Maryland residents, if appropriate for their circumstances, should continue to consider avoiding both state estate tax and inheritance tax by changing their domicile from Maryland to a state without estate tax or inheritance tax, such as Virginia, Delaware, or Florida. As these proposed law changes may again be introduced in coming years, Maryland taxpayers should continue to monitor Maryland legislative developments. At the federal level, the Big Beautiful Bill, with an increased estate tax exemption of $15 million per individual (among other tax law changes) has passed the House of Representatives. The Senate is now considering this bill, so taxpayers should also stay tuned for updates on this legislation. Whether the bill is ultimately enacted, revised, or neither, tax law will still require planning for taxpayers at all income and asset levels; contact Brittany Oravec and the other tax and estate planning attorneys at Selzer Gurvitch to discuss your options.
Estate tax laws at both the federal and state levels continue to evolve, with significant potential changes on the horizon. Understanding the current landscape, including exemption thresholds and inheritance tax rules, is critical for effective estate planning.
Current Federal Estate Tax and Exemption
The federal estate tax applies to estates whose value exceeds a certain exemption threshold at the time of a decedent’s death. As of 2025, the federal estate tax exemption is $13.99 million per individual, or $27.98 million for married couples using portability (essentially, the sharing of the exemption). Estates that exceed this threshold are taxed at a top rate of 40%.
This exemption, which is currently at an all-time high, was enacted under the Tax Cuts and Jobs Act (TCJA) of 2017. However, absent further legislative action, this exemption is set to revert to pre-2018 levels, adjusted for inflation, on Jan. 1, 2026. This would lower the exemption to approximately $7 million per individual ($14 million for married couples). This reduction would substantially affect high-net-worth individuals and families, potentially increasing estate tax burdens.
For the higher exemption to continue beyond 2025, Congress must pass new legislation to either make it permanent or set a different threshold. If no such action is taken, the exemption will automatically reduce in 2026.
Current Maryland Estate Tax and Exemption
Maryland also imposes estate taxes, separate from the federal estate tax. For 2025, Maryland’s estate tax exemption is $5 million per individual ($10 million for married couples using portability), significantly lower than the federal threshold. Estates that exceed this threshold are subject to tax at rates ranging from 0.8% to 16%, depending on the estate’s value.
Proposal to Reduce Maryland Estate Tax Exemption
On Jan. 15, 2025, Gov. Wes Moore proposed reducing Maryland’s estate tax exemption from $5 million to $2 million per individual (and from $10 million to $4 million per married couple). This proposal is aimed at generating additional state revenue and addressing concerns about budget deficits. However, it has also raised concerns about the movement of wealth outside of the state of Maryland. Most property is subject to estate tax in the state where the decedent was domiciled at death, so a decreased exemption may motivate high-net-worth individuals to consider relocating to states without estate taxes, such as Virginia, Delaware or Florida.
Maryland’s Inheritance Tax and Proposal for Elimination
Maryland is one of the few states that still imposes an inheritance tax, which is separate from the estate tax. Maryland levies a 10% inheritance tax on assets transferred to certain beneficiaries, including nieces, nephews, friends and more distant relatives. However, direct descendants, spouses and siblings are generally exempt. Unlike the estate tax, there is no inheritance exemption amount. For example, a $100 bequest to a niece or nephew at a decedent’s death would be subject to a $10 inheritance tax.
Gov. Moore also recently proposed eliminating Maryland’s inheritance tax altogether. Supporters of the repeal argue that the inheritance tax places an undue burden on middle-class families and encourages residents to move their wealth out of Maryland. If passed, the elimination of the inheritance tax could significantly reduce the tax burden on beneficiaries who are not immediate family members.
Planning Strategies to Prepare for These Changes
Given the potential changes to both federal and Maryland estate tax laws, proactive planning is essential. Key strategies include:
- High-net-worth individuals should consider making lifetime gifts to take advantage of the current high federal exemption before it decreases in 2026, and the Maryland exemption before it is potentially reduced.
- Irrevocable trusts, such as spousal lifetime access trusts (SLATs), can help shield assets from federal or state estate tax.
- With Maryland’s estate tax exemption potentially decreasing, some residents may consider relocating to states without an estate tax, such as Virginia, Delaware or Florida.
Federal and Maryland estate tax laws may experience significant changes that would impact many estate plans. The scheduled reduction of the federal estate tax exemption in 2026 and Maryland’s proposed changes to its estate tax and inheritance tax policies underscore the need for proactive planning with a trusted adviser. Even if individuals do not believe these changes will significantly impact their current estate plan, regular review of wills, trusts and beneficiary designations helps ensure they or their heirs will not be subject to unanticipated taxes. Reach out to Brittany Oravec at boravec@sgrwlaw.com to review your estate plan and consider strategies to avoid any unnecessary tax liability.
Brittany N. Oravec is an attorney in the business, tax planning and real estate practice groups at Selzer Gurvitch. She advises clients on corporate structuring, contracts, regulatory compliance and real estate matters, with a focus on tax optimization. Holding an LL.M. in Tax from Georgetown, she also counsels on governance, entity formation, and strategic business planning to minimize risk and maximize efficiency.
Disclaimer: This article is for informational purposes only and is not intended to provide legal advice. Reading this article does not create an attorney-client relationship between you and Selzer Gurvitch Rabin Wertheimer & Polott, P.C. or the author. Legal outcomes may vary based on specific facts and jurisdictions. The information presented is current as of the date of publication and may not reflect recent legal developments. If you have questions about your particular situation, please contact a qualified attorney.
