Effective January 1, 2018, the exemption (tax-free amount) from federal estate taxes increased to $11,200,000 per person. This amount is scheduled to increase yearly in step with inflation.
Because of “portability” (the ability of the estate of the second spouse to die to use any unused exemption of the first spouse to die) there will be no federal estate tax due for a married couple, except for any portion of their joint estate in excess of $22,400,000.
At the same time, the exemption from Maryland estate taxes increased to $4,000,000 per person. In 2018, Maryland does not have portability. Next year, 2019, the Maryland exemption will increase and be the same as the federal exemption and for persons dying in 2019 or later, there will be portability for the Maryland exemption as well.
The District of Columbia also increased its exemption from estate taxes as of January 1, 2018. Its estate tax law now matches the federal law. Thus, the exemption from D.C. estate taxes is now $11,200,000 per person or $22,400,00 per married couple.
Virginia abolished its estate tax in 2007. Consequently, only the federal estate tax (with its exemption of $11,200,000 per person) needs to be considered for Virginia residents in doing their estate planning.
All these changes in the estate tax laws mean that many existing Wills and Trusts have sophisticated tax planning that is now too restrictive and unnecessary. These changes also mean that estate tax considerations will not be meaningful in the vast majority of estates. Instead, the parties can concentrate on accomplishing family and personal goals as they prepare their Wills and Trusts.