The federal estate tax exemption is increasing to $15 million per person in 2026, but that doesn't mean estate planning gets simpler. For families with $1 million to $5 million in assets, this moment requires careful attention.
If you've been putting off estate planning because "we're not wealthy enough to worry about estate taxes," it's time to reconsider. The landscape has shifted, and the decisions you make now will shape your family's financial security for decades.
Why 2026 Estate Tax Changes Matter for Your Family
The One Big Beautiful Bill Act permanently set the federal estate tax exemption at $15 million per individual (adjusted for inflation annually). For married couples, that's $30 million in combined exemption.
Here's what this means: If your estate is valued below $15 million, federal estate taxes likely won't apply. However, that doesn't eliminate the need for strategic planning.
Three reasons you still need an estate plan: State estate taxes remain (Maryland has its own estate tax with a much lower threshold), asset protection matters beyond taxes (trusts and ownership structures protect against creditors and lawsuits), and family coordination prevents wealth destruction (without clear plans, inheritances trigger family conflict and unnecessary probate costs).
Common Estate Planning Gaps That Cost Families
Outdated beneficiary designations
Your 401(k), IRA, and life insurance beneficiaries override your will. If you listed your ex-spouse in 2008 and never updated it, guess who inherits? Your ex, not your current spouse or children.
Review beneficiaries annually. Life changes like marriage, divorce, births, and deaths require immediate beneficiary updates.
No trust structure for asset protection
Wills go through probate, a public, time-consuming, expensive process. Revocable living trusts avoid probate, maintain privacy, and provide clear instructions for asset distribution.
For families with minor children, special needs dependents, or beneficiaries who aren't financially responsible, trusts offer control that wills cannot provide.
Ignoring state-specific estate tax thresholds
Maryland's estate tax exemption is $5 million per person. If you live in Maryland with a $4 million estate, federal taxes won't apply, but state taxes will.
Other states with their own estate or inheritance taxes include Connecticut, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington. Know your state's rules.
Lack of powers of attorney and healthcare directives
Estate planning isn't just about death. It's also about incapacity. Without durable powers of attorney (financial and healthcare), your family faces court proceedings to make decisions if you become incapacitated.
Healthcare directives specify your wishes for medical treatment when you cannot communicate. Without them, family members face agonizing decisions with no guidance.
Advanced Strategies for High Net Worth Families
Once basic estate planning is in place (will, trust, beneficiaries, powers of attorney), consider these strategies:
Gifting strategies to reduce estate size
The annual gift tax exclusion allows you to give $19,000 per recipient per year (2026) without reducing your lifetime exemption. Married couples can give $38,000 per recipient.
Systematic gifting to children and grandchildren reduces your taxable estate while potentially funding education, home purchases, or investment accounts. You also get to see your beneficiaries enjoy the assets during your lifetime.
Irrevocable life insurance trusts (ILITs)
Life insurance death benefits are income-tax-free, but they're included in your taxable estate. An ILIT removes life insurance from your estate, preserving more wealth for heirs.
ILITs require careful setup and ongoing administration, but for families with significant life insurance, the estate tax savings can be substantial.
Grantor retained annuity trusts (GRATs)
GRATs allow you to transfer appreciating assets to heirs while minimizing gift tax consequences. You retain an annuity payment for a set term, and remaining assets pass to beneficiaries.
GRATs work particularly well for business owners expecting significant growth in business value or for families holding highly appreciating investment assets.
Charitable remainder trusts (CRTs)
If philanthropy is important to your family, CRTs offer tax benefits while supporting causes you care about. You receive income during your lifetime, and the remainder goes to charity upon your death.
CRTs provide income tax deductions, remove assets from your taxable estate, and create a lasting legacy aligned with your values.
The Multi-Generational Planning Conversation You're Avoiding
Estate planning isn't just a legal and financial exercise. It's a family communication challenge. The greatest wealth transfer in history is underway, yet most families avoid the conversations that make transfers successful.
Why families avoid estate planning discussions: You don't want children focused on inheritance rather than building their own success. You're uncomfortable discussing mortality. You worry about family conflict or entitlement.
These concerns are valid, but avoidance creates worse outcomes. Families unprepared for wealth transfer face higher rates of wealth loss, family conflict, and poor financial decisions by heirs.
What productive estate planning conversations include: Your values and intentions (why did you build this wealth? what do you hope it accomplishes?), family governance structures (how will decisions be made? who manages family assets?), heir education and preparation (are your beneficiaries financially literate?), and contingency planning (what happens if a beneficiary predeceases you or has creditor issues?).
The families who navigate wealth transfer successfully start these conversations early and revisit them regularly.
Your Next Steps: Building a Comprehensive Estate Plan
Estate planning isn't a one-time event. It's an ongoing process that evolves with your life, your wealth, and changing laws.
Start with these five actions:
1. Inventory your assets. List all bank accounts, investment accounts, real estate, business interests, life insurance, and retirement accounts. Include approximate values and current beneficiary designations.
2. Review existing documents. When was your will last updated? Do you have a trust? Are powers of attorney in place? If documents are more than five years old, they likely need updates.
3. Clarify your goals. What do you want your estate plan to accomplish? Asset protection? Tax minimization? Family harmony? Charitable giving? Clear goals guide better planning.
4. Engage professional advisors. Estate planning requires coordination between your financial advisor, estate attorney, and CPA. Each brings expertise that creates a comprehensive plan.
5. Communicate with family. Schedule a family meeting to discuss your intentions, values, and expectations. This doesn't mean disclosing every financial detail. It means providing context and reducing surprises.
Estate Planning Is About More Than Taxes
The 2026 estate tax changes create planning opportunities, but they're not the only reason to prioritize estate planning. You've worked hard to build financial security. Protect it.
Your estate plan determines whether your wealth strengthens your family or creates division. Whether your beneficiaries are prepared or overwhelmed. Whether your values live on or get forgotten in legal proceedings.
Don't let procrastination or discomfort prevent you from creating a plan that protects your family and honors your legacy.
This information is not intended to be a substitute for specific individualized tax, legal, or investment advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
Please consult your financial professional regarding your specific situation.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
Estate planning requires legal assistance. Neither LPL Financial nor its registered representatives offer legal advice.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a registered investment advisor and separate entity from LPL Financial.
Chesapeake Financial Planners | 2402 Scotlon Ct, Forest Hill, MD 21050 | (410) 652-7868 | www.chesapeakefp.com
