Friday, December 20, 2019
It has been two years since the passage of the Tax Cuts and Jobs Act (TCJA), and the Department of the Treasury is still publishing regulations to clarify the impact of the new law on the estate and gift tax rules. The newest regulations were provided last month and they may effect your current estate plan.
From the 2018 to now, the annual gift tax exemption amount has stayed the same at $15,000, or $30,000 for couples. The estate tax exemption has been increased to $11,580,000 (or $23,160,000 for a married couple) in 2020 due to inflation. This amount is set to sunset, or expire, on January 1, 2026 and revert back to TCJA numbers. The November regulations clarified that assets transferred or gifted before the sunsetting of the Increase Exemption Amount will be sheltered from estate tax once the amount is lowered back to the Basic Exemption Amount. The regulations also confirm that in general, a taxpayer’s gift is deemed to be made first from his or her Basic Exclusion Amount, and second, from his or her Increased Exemption Amount.
Another question was presented, dealing with the deceased spousal unused exemption (DSUE). Under certain circumstances, a decreased spouse can transfer their unused exemption amount to their surviving spouse. The regulations confirmed that though the living spouse's exemption amount will revert back to the pre-TCJA amount, the transferred DSUE of a spouse who passed away before January 1, 2026 will not revert back to the lower amount.
See Alexia M. Fishman, Tax Update: The Impact of Newly Published Regulations on the Estate and Gift Tax Laws, Cozen O'Connor, December 16, 2019.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.