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Legacy Matters
BlogsPublications | December 4, 2018
3 minute read
Legacy Matters

There is No Time Like the Present to Make Gifts

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:

  • Gifting now provides significant tax savings.
    Transferring your assets now means that appreciation and growth on those assets will occur outside of your estate. The tax savings to you from removing these assets from your estate today rather than in seven years can be significant and will likely provide a greater benefit to the recipient, too.
  • This offer may not last through 2025.
    The recent election brought some changes to the political landscape, and the 2020 election could bring more, only increasing the chances the exemption could decrease much earlier than scheduled.
  • Take advantage of current low interest rates while they last.
    Some planning strategies like GRATs and sales of assets to irrevocable grantor trusts for a note offer a better chance for returns to be passed to beneficiaries, transfer tax free, when interest rates are low. With rates rising, sooner is better to complete your gifting.
  • Shorten the wait for your heirs.
    The trend toward a longer life expectancy means many folks will live into their 90’s. If you don’t make lifetime gifts, your children may not receive an inheritance until they are in their 70’s. It is likely that the money they would be receiving at that time would have been more useful to them in their younger years, when they were looking to travel with the family, buy vacation homes, put children through college and pay for weddings. Gifting money now is like an advance on their inheritance, but without the estate tax.  
  • Gifting helps prepare the next generation.
    Gifting some wealth now also provides the opportunity for you to teach younger family members about investing, taxes, philanthropy and the responsibilities of trustees and beneficiaries. At Warner, we have seen how working with a smaller amount of wealth now will help them learn how to manage a larger inheritance in the future. 

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