“My estate might owe taxes. Do I have an estate planning problem?”
Estate planning is often seen as something reserved for the ultra-wealthy or those nearing retirement, but it’s an important step for anyone with assets, a family, or long-term goals. If you’ve ever thought, “My estate might owe taxes, but I haven’t explored ways to minimize them,” you’re not alone. Many people assume estate taxes are unavoidable or too complicated to address. However, overlooking tax-efficient strategies can leave your heirs with an unnecessary financial burden – clearly signaling an estate planning gap. Here’s what you need to know.
Understanding the Tax Burden on Estates
First, it’s important to understand what estate taxes involve. In the United States, the federal estate tax – often referred to as the “death tax” – applies only to estates that exceed a certain threshold. As of 2026, the federal exception is $15 million per individual, so most estates fall below that limit and owe no federal tax. However, many states, including Maryland, impose their own estate or inheritance taxes at much lower thresholds. Even if your estate is relatively modest, capital gains on appreciated assets, income taxes on retirement accounts, and potential gift taxes can still reduce what ultimately passes to your beneficiaries.
The real challenge arises when these tax-saving opportunities aren’t explored early. Taxes aren’t just an after-the-fact inconvenience – they can significantly diminish what you’ve worked hard to build. Without thoughtful planning, your beneficiaries could face liquidity issues, forcing them to sell assets quickly – and often at a loss – to cover tax obligations. This creates not only a financial burden, but also an emotional one, especially when cherished family heirlooms or long-standing business is involved.
Why Not Planning for Taxes is a Red Flag
If you suspect your estate may owe taxes but haven’t explored strategies to reduce them, there’s a strong chance you have an estate planning gap. Here’s why:
- Missed Opportunities for Lifetime Gifting: Lifetime gifting is one of the most effective and accessible ways to reduce estate taxes. In 2026, the annual gift tax exclusion allows you to give up to $19,000 per person without triggering taxes or using any of your lifetime exemption. Over time, these gifts can meaningfully reduce the size of your taxable estate. For larger transfers, using your lifetime gift tax exemption – aligned with the federal estate tax exemption – allows assets such as real estate or stock to grow outside your estate, maximizing tax efficiency.
- Underutilized Trusts: Trusts are powerful tools for minimizing taxes and protecting assets. An Irrevocable Life Insurance Trust (ILIT) removes life insurance proceeds from your taxable estate, giving your heirs tax‑free liquidity when they may need it most. A Qualified Personal Residence Trust (QPRT) lets you transfer your home at a reduced value while retaining the right to live there. Charitable Remainder Trusts (CRTs) can provide lifetime income, deliver a charitable deduction, and reduce estate taxes. If these tools aren’t part of your planning, you could be missing significant benefits.
- Retirement Account Oversights: Retirement accounts like IRAs and 401(k)s carry embedded income taxes for beneficiaries. Naming a spouse as beneficiary can offer tax‑deferred rollover benefits, while non‑spouse beneficiaries are often required under the SECURE Act to withdraw the full balance within 10 years – triggering accelerated taxation. Planning techniques such as Roth conversions or using a trust as beneficiary can help manage the tax impact, but they require careful, proactive coordination.
- Failure to Leverage Exemptions and Deductions: Key tax rules can dramatically reduce or eliminate estate tax liability when used correctly. The marital deduction allows unlimited tax‑free transfers to a U.S. citizen spouse, but without proper planning, the survivor’s estate could face unnecessary taxes later. Portability enables a surviving spouse to use a deceased spouse’s unused exemption – yet this must be elected through a timely estate tax return. Charitable deductions can further reduce or eliminate estate taxes for those with philanthropic intentions.
Steps to Address Your Estate Planning Problem
The good news is that it’s never too late to begin – though starting sooner will always give you more options. A practical first step is to complete a net worth assessment by outlining your assets, liabilities, and anticipated growth. From there, meeting with an estate planning attorney can help you model different scenarios under current laws and identify strategies tailored to your specific goals and circumstances.
Remember, estate planning is about far more than taxes. It’s about maintaining control, protecting what matters most, and ensuring peace of mind for you and your loved ones. By taking steps to minimize taxes, you’re ultimately maximizing the legacy that passes to the people and causes you care about.
Final Thoughts
If the thought of estate taxes keeps resurfacing without action, it’s a clear sign of an estate planning problem – but one that can be resolved with informed, strategic steps. Don’t let inaction create unnecessary stress or financial strain for your family. Schedule a consultation with an attorney on the Estates team at Liff, Walsh & Simmons to explore personalized solutions and take control of your long-term plan. Your future self – and your loved ones – will be grateful you did.
Greg Ferra of Liff, Walsh & Simmons is the lead of the Estates and Administration Practice. Greg also serves as counsel for the firm’s affiliated title company, Eagle Title, LLC, advising the company in real property transactions that involve trusts and probate estates.
At Liff, Walsh & Simmons, our Estate Planning and Administration practice area helps individuals and families protect their legacies and plan for the future. We provide personalized guidance in wills, trusts, powers of attorney, and comprehensive estate plans tailored to each client’s unique circumstances. Our attorneys are committed to making the estate planning process clear, manageable, and aligned with your goals, providing peace of mind and security for you and your loved ones. Please contact Liff, Walsh & Simmons at 410-266-9500 to schedule a consultation.
