In 2019, the IRS reassured ultra-high-net-worth families that any gifts they make between 2018 and 2025 to remove assets from their taxable estates under the generous but temporary provisions of the Tax Cuts and Jobs Act (TCJA) would not lose those tax benefits when the estate-tax lifetime-exclusion reverts to its pre-TCJA level in 2026.
The TCJA, enacted in 2017, doubled the amount individuals may transfer to heirs during life or at death without incurring federal estate or gift taxes from $5.48 million to $11.2 million in 2018. With inflation adjustments, the exemption in 2024 is $13.61 million for individuals and $27.22 million for married couples filing joint returns. However, because the law also calls for these higher thresholds to sunset in 2026, taxpayers were left to wonder whether the IRS could claw back gifts they made during this period should they pass away in 2026 or later.
In welcome news for taxpayers, the IRS clarified that the higher exemption amount is a “use it or lose it” benefit that applies only to decedents who make actual gifts between 2018 and 2025. For example, if an individual gifted away $9 million in 2021 (when the exemption was $11.2 million), the gift will continue to be exempt from tax if they pass away in 2026 or later when the higher exemption amount no longer applies. In other words, you may make a gift of as much as $13.61 million in 2024 and avoid exposure to lifetime gift tax or having that amount included in your taxable estate upon death, whenever that occurs. By the same token, large gifts one makes today will continue to receive the tax benefits of the higher exclusion amount even if the political winds blow and a new administration changes existing tax laws.
About the Author: Eric Zeitlin is managing director of Provenance Wealth Advisors (PWA), an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs and a registered representative with PWA Securities, LLC. He can be reached at the firm’s Fort Lauderdale, Fla., office at (954) 712-8888 or info@provwealth.com.
Provenance Wealth Advisors (PWA), 200 E. Las Olas Blvd., 19th Floor, Ft. Lauderdale, FL 33301 (954) 712-8888.
Eric Zeitlin is a registered representative of and offers securities through PWA Securities, LLC, Member FINRA/SIPC.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of PWAS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making any investment decision, please consult with your financial advisor about your individual situation.
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Posted on June 20, 2024