The
Treasury Department and the IRS have issued proposed regulations that provide
that individuals taking advantage of the increased gift and estate tax
exclusion amounts in effect from 2018 to 2025 will not be adversely impacted
after 2025 when the exclusion amount is scheduled to drop to pre-2018
levels.
These
proposed regulations implement changes made by the 2017 Tax Cuts and Jobs Act
(“TCJA”). The TCJA temporarily increased the “basic exclusion amount” (“BEA”)
from $5 million to $10 million for tax years 2018 through 2025, adjusted for
inflation. For 2018, the inflation-adjusted BEA is $11.18 million.
In 2026, the BEA will revert to the 2017 level of $5 million as adjusted
for inflation. As a result, because of the way gift and estate taxes are
calculated, there was concern that gifts exempt from gift tax by the increased
BEA could later be subject to estate tax.
In sum,
once the proposed regulations are adopted, if you have made, or plan to make,
large gifts between 2018 and 2025, you will be able to do so without concern
that you will lose the tax benefit of the higher exclusion amount once it
decreases after 2025.
If you
have any questions about this Alert or gifting strategies, please contact Stephen Pagano at spagano@riker.com,
Lauren Spitser at lspitser@riker.com or
your tax advisors.
