Should you make gifts now?

The estate tax exemption doubled this year and will be $11.4 million next year. This means that you give away that amount (not excluding annual exclusion gifts of $15,000) without paying gift tax. The exemption, though, is scheduled to revert back down to $5 million, adjusted for inflation, in 2026. This back-and-forth thing with the tax exemption has happened a few times in the past.

One of the interesting things about a reduction in the exemption is whether you could use the current exemption by making big gifts and not be harmed or taxed when the exemption goes down. It would seem logical that if you followed the rules, you should not have any problems. Unfortunately, we are talking about the tax code – where logic does not apply!

Thankfully, the US Treasury and IRS have issued proposed regulations that confirm that large gifts today won’t be somehow attacked in the future, assuming the exemption does indeed go back down.  Interesting in reading the proposed regulations? You can do so here.