Just in time for the holidays, the IRS has given the gift of certainty in the form of guidance and proposed regulations. What a gift this is!
While the large increase in the lifetime gift and estate tax exemption in the recent Tax Act was exciting news for high net worth families, many have hesitated to take advantage of this opportunity to make additional gifts, due to fear of “clawback” when the exemption decreases in the future. Imprecise wording in the Tax Act left uncertainty about whether the IRS might try to collect or “clawback” taxes on gifts that were made during this increased exemption period following its expiration at the end of 2025.
The November IRS announcement indicates that this will not occur in the future, stating, “The proposed regulations ensure that a decedent’s estate is not inappropriately taxed with respect to gifts made during the increased BEA (basic exclusion amount) period.”
Now that the IRS has confirmed that making gifts up to the higher exemption will not harm your estate after 2025, we encourage you to begin your planning now, for several reasons:
Already used up your exemption in 2018? Another present awaits you in 2019 ... Next year’s limits are higher than this year’s, so if you already made large gifts in 2018 (up to $11.18M for individuals and $22.36M for married couples), you can give more in 2019 because the exemption amount will increase to $11.4 M for an individual and $22.8 million for married couples. That means a married couple can gift an additional $440,000 tax free in 2019.
Don’t let these “gifts” gather dust in a closet – use them today. If you are ready to start gifting, please contact your Warner attorney or Laura Jeltema at 616.752.2161 or at firstname.lastname@example.org.