IRS proposes no 'clawback' from higher estate and gift tax exemption

IRS proposes no 'clawback' from higher estate and gift tax exemption
The tax agency says it won't try to collect retroactively when the higher exemptions expire in 2025.
NOV 30, 2018
By  Bloomberg

The Internal Revenue Service has proposed a potential benefit for wealthy taxpayers, saying that individuals who give lots of gifts to their heirs under a generous but temporary provision of the 2017 Republican tax overhaul won't later owe taxes on them. Last year's tax law doubled the value of assets that can be transferred to heirs without triggering federal estate or gift taxes over a lifetime — to almost $11.2 million for an individual and $22.4 million for a married couple. The thresholds rise slightly in 2019 and potentially more in later years, before expiring in 2025, when the exemptions revert back to half of their current levels. Amounts over exemption levels are taxed at 40%. Estate planning professionals had been worried that come 2026, the tax agency might attempt to collect taxes on gifts that were already made under the doubled exemptions. But the IRS said late Tuesday in a proposed regulation that it won't seek such retroactive taxes. "Making large gifts now won't harm estates after 2025," the agency said in a brief accompanying statement. "This is definitely good news — it takes uncertainty off the table," said Lester Law, an estate and trust planning lawyer in Washington. "It's clear that Treasury did not want to have a clawback be a 'gotcha."' Mr. Law added that taxpayers shouldn't wait to take advantage of the exemption because Democrats could potentially seek to roll it back. "It's use it or lose it," he said. Individual gifts will still be limited by an annual exclusion, which is $15,000 this year. The agency will hold a hearing on the proposed rule on March 13.

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.