One of the major changes in the 2017 Tax Cuts and Jobs Act (TCJA) was an increase in the estate and gift exemption, which is the amount that one can gift during their life or at death free of taxes. In 2017, that amount was $5.49 million and today the exemption is $11.4 million for an individual or $22.8 million for a married couple. With the TCJA set to sunset in 2026 and the exemption amount resetting back to 2017 levels (on an inflation adjusted basis), a unique window exists to gift assets between now and when the law sunsets to take advantage of the increased exemption.
Since the TCJA was passed, there has been some concern about what would happen to large gifts made during this period of time, if the individual then passed away when the exemption amount was much lower. Many professionals were concerned that the IRS could add back those large gifts to the estate, subjecting them to estate taxes.
The IRS just recently issued guidance providing us some clarity on that concern. Ultimately, there will be no claw back of gifts made while the exemption is at a higher amount, if the individual making the gift then passes away during a period when the exemption amount is lower. What this essentially means is that the IRS has declared the increased exemption amount a “use it or lose it” situation.
For those individuals and families with potential estate tax issues, we strongly urge them to consider gifting strategies to take advantage of the $11.4 million estate and gift exemption that exists under the current law.
As always, these laws and policies are subject to change so we are encouraging folks to utilize their increased exemption amount, if appropriate, as soon as possible. Always check with your financial advisor to understand how this strategy fits with your overall plan.
Important disclosure information
Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.
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This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.
RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.