Focus on what counts

Now more than ever is a good time to consider transferring assets out of an individual’s estate

November 30, 2018
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On November 21st, the IRS announced in a proposal that individuals taking advantage of the increased gift and estate tax exclusion amounts in effect from 2018 to 2025 would not be adversely impacted after 2025 when the exclusion amount is scheduled to drop to pre-2018 levels. This had been an issue for planners in the last few months since the 2017 Tax Cuts and Jobs Act (TCJA) was signed into law on December 22, 2017. Planners have been concerned that if their clients made gifts in excess of their annual exemption of $15,000 per person per year (2018), taking advantage of the larger lifetime gift/estate exemption of $11,180,000 (2018), they would have an estate tax clawback if they passed away post December 31, 2025.

In general, gift and estate taxes are calculated using a unified rate schedule. Gift and estate taxes are imposed on taxable transfers of money, property and other assets. Any tax due is determined after applying a credit (formerly known as the unified credit) based on an applicable exclusion amount. When the TCJA was initially enacted, it was uncertain whether larger gifts using the $11,180,000 (2018) lifetime exclusion would be taxed for estate and generation-skipping transfer tax (GST) purposes when the unified credit reverted to pre-2018 levels. The Treasury Department and the IRS have issued proposed regulations which clarify changes made by the TCJA. The proposal will be voted on in March 2019. As a result, individuals planning to make large gifts between 2018 and 2025 can do so without concern that they will lose the tax benefit of the higher exclusion amount when it is scheduled to sunset after 2025.

Now is the time to consider asset transfers to younger generations to take advantage of the increased estate and gift lifetime exemption, as well as the increased GST exemption. There are numerous ways these transfers can be made. Individuals can make cash gifts and should also consider making gifts of securities or business interests where discounts may be taken.

While this proposal takes uncertainty off the table, it is possible that Democrats could potentially seek to roll back the increased exemption, making it more important for taxpayers to address their plans sooner rather than later.

Caution - estate plans are like snowflakes, no two are identical. Therefore, please consult your Citrin Cooperman Advisor for more information on these recent developments and to determine what the correct plan is for you and your family.

Heather Oboda is a tax director at Citrin Cooperman with nearly two decades of experience in public accounting. With a focus in trust and estates, Heather provides tax, financial, estate, and succession planning. She can be reached at