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2026 Estate Tax Changes – Maryland, D.C., and Virginia

The One Big Beautiful Bill Act (OBBBA) made a significant and permanent change to the federal estate and gift tax exemption. As of January 1, 2026, the federal lifetime exemption has been permanently reset to $15 million per individual (with portability allowing married couples to pass up to $30 million free of federal estate tax) . This is a huge increase from the previous, scheduled sunset, and for the vast majority of Americans, it effectively removes federal estate tax from the equation .

However, for families in Maryland, Washington D.C., and Virginia, the story doesn’t end there. A “no federal tax” situation does not mean “no tax at all” due to state-level estate and inheritance taxes that are decoupled from the federal threshold . Understanding the rules in your specific jurisdiction is critical for effective estate planning.

The Federal Framework: $15 Million Is Now Permanent

The OBBBA has permanently set the federal exemption to $15 million, adjusted annually for inflation starting in 2027 . The federal tax rate on any portion of an estate exceeding the exemption remains 40% . For many, this means federal estate tax planning is no longer a primary concern. However, the changes are still significant for existing plans, as “trust documents use a formula tied to ‘the federal estate tax exemption amount,’ which has now changed dramatically and could redirect assets in ways you didn’t intend” .

Maryland: The State-Level Tax Gap

Maryland presents the most significant state-level estate tax burden in the region. Unlike the new $15 million federal threshold, Maryland’s estate tax exemption remains much lower, at approximately $5 million . This creates a considerable “gap” for Maryland families with estates between the state and federal exemption levels. This means many estates will have no federal estate tax liability but will still owe tax to the state of Maryland. Proactive trust planning is essential for Maryland residents with significant assets.

Washington D.C.: No Portability, Need for Planning

The District of Columbia also imposes its own estate tax, separate from the federal system, with an exemption set well below the $15 million federal level . A crucial distinction for D.C. residents is that the District does not allow portability between spouses. Portability is a federal rule that allows a surviving spouse to use any unused portion of their deceased spouse’s federal estate tax exemption. Since D.C. does not allow this, “each spouse’s exemption must be used on its own estate, not transferred to the survivor” . This makes proactive trust planning—rather than relying on the surviving spouse’s exemption alone—especially important for D.C. residents.

Virginia: No State Estate Tax

Virginia offers a simpler landscape for its residents. The Commonwealth does not impose a separate state estate tax . Therefore, Virginia families benefit directly from the higher $15 million federal threshold without a state-level gap to plan around. That said, “even ‘no state tax’ families shouldn’t assume no paperwork is needed.” For couples who want to utilize federal portability, an estate tax return must still be filed in a timely manner to claim a deceased spouse’s unused exemption .

Planning Considerations for the DMV Region

For families across Maryland, D.C., and Virginia, the 2026 tax changes mean that estate plans drafted under the old exemption numbers need a second look. This is particularly true for:

  • Maryland and D.C. residents with a combined estate (including life insurance and retirement accounts) approaching $5 million .

  • Those who made large lifetime gifts under the prior exemption and need to know how much exemption capacity they have left under the new $15 million figure .

  • Plans that rely on a credit shelter or A/B trust structure built around exemption levels that no longer reflect current law .

Additionally, the federal annual gift tax exclusion rose to $19,000 per recipient in 2026 ($38,000 for a married couple giving jointly) . This is a simple and often underused way to move wealth to the next generation each year without touching your lifetime exemption at all.

Conclusion

The federal estate tax changes have removed a major financial concern for many, but they have not eliminated the need for careful estate planning, especially for those living in Maryland and D.C. where state-level taxes remain a factor. The removal of portability in D.C. and the disparity between state and federal exemptions in Maryland are critical factors that require careful consideration and professional advice to ensure your legacy is protected and your wishes are honored.