Sand Hill’s Chief Investment Officer, Brenda Vingiello, CFA, returned to CNBC’s Halftime Report on August 28, 2019 to discuss interest rates and the current stateread more
Phew! IRS Announces No Clawback of the Lifetime Gift Tax Exemption
The Tax Cuts and Jobs Act of 2017 generously increased the Lifetime Exemption for gifts from what was a $5 million base amount per person to $10 million for 2018, along with inflation-adjusted increases through 2025. But this attractive provision is due to sunset in 2026 – that is, it is set to expire on 12/31/25 and at that point go back to where it was in 2017 (adjusted for inflation) – meaning that this substantially higher gifting amount is only temporary. It could get extended by Congress in due course, or even made permanent; but then again, it also could conceivably change and be reduced. In other words, if applicable, it probably makes sense to take advantage of it sooner rather than later.
However, since its passage, a related significant concern was that there could be an ultimate clawback of any such gifts that were made once the sunset occurs. Fortunately, the IRS has since proposed a ruling that directly addresses this concern, whereby they state that no clawback will apply to these lifetime gifts. This IRS ruling is still in the review process and not yet final, but most tax and legal professionals believe that this concern is now fully addressed and effectively resolved.
And yet, again, this is, potentially, very much a “use it or lose it” situation. This significantly increased current exemption presents a compelling opportunity for wealthy families to make more proactive gifts to family members during their lifetime, which is a common strategy used to reduce the value of your estate during your life while also providing for loved ones who may have meaningful uses for these gifts today. Additionally, but separately, the annual Gift Tax Exclusion amount remains the same as last year, at $15,000 for 2019. The inflation-adjusted Lifetime Exemption amounts for 2019 are now $11.4 million per individual and $22.8 million per married couple. This means that an individual can leave $11.4 million to heirs and pay no federal estate or gift tax, while a married couple will be able to shield $22.8 million. There is still plenty of time to explore this planning strategy for your family and your Wealth Manager is here to help!
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