Q & A with Tax Manager Melissa Chauvin on the Lifetime Exemption

Question: I took advantage of the increased lifetime exemption amount and it has reverted back to a lower amount – now what?

Answer: Under the Tax Cuts and Jobs Act (TCJA) passed at the end of 2017, the basic exclusion for estate and gift tax was increased to $10 million, indexed for inflation after 2011, for decedents dying after 12/31/2017 and before 1/1/2026. The increased amount is set to revert back to $5 million for gifts made and estates of decedents dying after 12/31/2025. With the increased amount being temporary, the IRS has proposed regulations to prevent a “clawback” of the applicable exclusion amount. The proposed anti- clawback regulations will allow the exclusion amount to be the greater of the two credit amounts for decedents dying after 12/31/2025 that made gifts under the higher exclusion amount.

Example: Taxpayer made post-1976 taxable gifts of $9 million when the exclusion amount was $10 million. Taxpayer dies 3/1/2026 when the exclusion amount is $5 million. Under the proposed anti- clawback regulations, the IRS would allow a basic exclusion amount for the taxpayer’s estate of $9 million.
As of the end of June 2019, the proposed regulations have still not been finalized. For additional information on the increased exemption, the proposed anti-clawback regulations and your estate planning questions, please contact one of our tax professionals for assistance.

Don Engler

Director - Business Development

Over forty years of service industry marketing and sales experience. As leader in new business development for the firm, Mr. Engler is responsible for coordinating all sales, marketing, promotion and public relations activities.