The federal estate tax exemption is now permanently $15 million per person. Maryland's is $5 million — frozen since 2019 and not indexed for inflation. That $10 million gap is the single most important number in estate planning for Frederick County families, and it means the estates most at risk are the ones whose owners are convinced they have nothing to worry about.
For years, Maryland families planned around an expected cliff: the federal estate tax exemption was scheduled to sunset at the end of 2025, dropping back to roughly $7 million per person. Estate plans were built, trusts were funded, and gifts were accelerated to beat that deadline.
The cliff never came. The One Big Beautiful Bill Act, signed July 4, 2025, permanently set the federal estate and gift tax exemption at $15 million per person ($30 million per married couple) effective January 1, 2026, indexed for inflation thereafter. The federal estate tax rate remains 40% above that threshold. For a full picture of the law, see our OBBBA guide.
Maryland did not follow. The Maryland estate tax exemption remains $5 million per person — where it has sat since 2019, with no inflation indexing. The result is a gap that has never been wider.
| Federal | Maryland | |
|---|---|---|
| Exemption per person (2026) | $15 million | $5 million |
| Married couple (with portability) | $30 million | $10 million |
| Indexed for inflation? | Yes, from 2027 | No — frozen since 2019 |
| Top rate | 40% | 16% |
| Separate inheritance tax? | No | Yes — 10% on certain beneficiaries |
The danger zone: estates between $5 million and $15 million. In this range, federal estate tax is exactly zero — and Maryland estate tax is 100% of the bill. Families who hear "the federal exemption is $15 million" and conclude they're safe are precisely the families who get hit. Federal planning does nothing for you here. Only Maryland-specific planning does.
Five million dollars sounds like someone else's problem. Then you add it up:
A married couple with a paid-off house, healthy retirement accounts, and a $2 million life insurance policy can cross $10 million without ever feeling wealthy. And because Maryland's exemption is frozen while asset values keep climbing, more Frederick County families drift over the line every single year — without doing anything at all.
Maryland is one of the few states that imposes both an estate tax and an inheritance tax. They work differently, and the distinction matters:
Close family members — spouse, children, grandchildren, parents, siblings, and certain others — are exempt from the inheritance tax. Nieces, nephews, cousins, friends, and unmarried partners generally are not. This catches people who leave assets to a favorite niece or a longtime partner and never realize a 10% tax rides along with it. For estates that need to work through both layers, our estate and trust tax team handles the filings.
Maryland's estate tax exemption is portable — but only if you file for it. When the first spouse dies, the personal representative must file a Maryland estate tax return and make the portability election, generally within nine months of death, to transfer the unused $5 million exemption to the surviving spouse. Miss it and the exemption is gone permanently — costing the family potentially hundreds of thousands of dollars when the second spouse dies. This is a filing that must happen even when no tax is due at the first death, and it is one of the most expensive things Maryland families overlook.
Federal portability requires its own timely election on a federal estate tax return. The two systems are separate, and married couples with substantial estates need both elections handled in a coordinated way.
Here's a structural advantage: Maryland has no gift tax. Assets given away during life leave your Maryland taxable estate. Using the federal annual exclusion — $19,000 per recipient per year, $38,000 for a married couple giving jointly — a family can systematically move assets out of the estate without touching anyone's lifetime exemption. Over a decade, gifts to several children and grandchildren can reduce a taxable estate by millions.
And because the federal exemption is now $15 million, larger lifetime gifts that count against the federal lifetime exemption often cost nothing federally while still removing the asset — and all its future appreciation — from the Maryland estate.
Frederick County farm families have a specific tool: Maryland excludes up to $5 million of qualified agricultural property from the estate tax, when the property passes to a qualified recipient who agrees to keep it in farming. Value above that exclusion is taxed at a capped 5% rather than the graduated rates. The catch is a recapture provision — the tax comes back if the land stops being farmed within the required period. For families whose wealth is in land rather than cash, this exclusion can be the difference between keeping the farm and selling it to pay the tax. See our farm and agricultural tax guide for the broader picture.
Credit shelter trusts, irrevocable life insurance trusts (which can remove policy proceeds from the taxable estate entirely), and other structures remain effective — but they need to be designed around the Maryland threshold, not the federal one. Many existing Maryland estate plans were drafted with formula clauses tied to the federal exemption, which now behave very differently at $15 million than they did at $5 million or $11 million. A plan that was elegant in 2017 can misfire badly today.
The liquidity problem: Maryland estate tax is generally due nine months after death — in cash. Estates concentrated in illiquid assets (a farm, a business, commercial real estate) can face a seven-figure bill with no cash to pay it, forcing a sale of the very asset the family was trying to preserve. This is the scenario that quietly destroys family businesses and farms, and it is entirely preventable with planning.
How we work with Frederick County families: we calculate actual estate tax exposure at both the Maryland and federal level, coordinate portability elections at the first death, model multi-year gifting strategies, handle the estate and fiduciary income tax filings, and work alongside your estate attorney so the tax analysis and the legal documents actually agree. If your plan was built around the assumption that the federal exemption would fall in 2026, it is now based on a premise that never came true — and it should be revisited.
If your plan assumed the federal exemption would drop, it's built on a premise that never happened. We'll calculate your actual Maryland exposure and show you what can still be done. Call (301) 662-6992.
Book a ConsultationNo. You owe zero federal estate tax, and Maryland estate tax on the $3 million above its $5 million threshold. This is exactly the trap: the federal headline creates false comfort while the entire tax bill sits at the state level. For estates in this range, Maryland planning isn't the secondary consideration — it's the only consideration.
If you own the policy, yes — the death benefit is included in your gross estate, which surprises nearly everyone. A $2 million policy can be what pushes an otherwise-comfortable estate over the Maryland line. An irrevocable life insurance trust is the standard fix, and it's worth exploring before the numbers get worse.
Possibly, and this is urgent if it was recent. To preserve your spouse's unused $5 million Maryland exemption, a Maryland estate tax return making the portability election generally must be filed within nine months of death — even though no tax was due. Missing it permanently forfeits the exemption. If you're inside that window, or think you may be, call us now rather than later.
Possibly. Nonresidents who own Maryland real estate or other tangible property located in Maryland can trigger a Maryland estate tax filing requirement on that property. Out-of-state families with a Frederick County farm, rental, or vacation property should have this reviewed rather than assumed away.
By Roy Cogliandolo, CPA · Mercer Flanagan · May 19, 2026
This article is general information, not tax or legal advice. Estate tax law is complex and fact-specific, and exemption amounts, rates, and filing deadlines change — work with a qualified CPA and estate attorney before making decisions.