Friday, December 29, 2017
In 2012, the Senate introduced a bill designed to address problems caused by the constantly shifting estate and gift tax thresholds. Despite the potentially severe consequences this issue can cause for an individual taxpayer, under the new tax law, the Senate allows the IRS to handle the problem rather than adopting language from the 2012 bill. A possible reason for failing to adopt the provision is that the 2012 bill language may have been too insubstantial. If the 2012 bill language had been adopted, it would be possible for a taxpayer to distribute $11 million to his children while alive and then die in 2026, when the exclusion amount has reverted to an inflation-adjusted $5.5 million, with no estate tax consequences. But, if the same taxpayer had given his children $5.5 million while living and subsequently passed away in 2026 with a $5.5 million estate, he would be subject to a 40% estate tax. At face value, this system appears unbalanced and likely deserves more consideration.
See James G. Blase, Clawback Under New Tax Law, Wealth Management.com, December 27, 2017.