Q: Hi Under the new gift tax laws 2018-2025 with a cap of 11.57 million lifetime gift exclusion amount...
If an estate is worth 10 million now, would it be better to gift half of the estate to avoid the 47% estate tax on anything over 5 million which the new law reverts to in 2026...or possibly sooner
A: Treasury Decision 9884 contains the final regulations on this issue, and include a special rule allowing the estate to figure its estate tax credit using the higher of the basic exclusion amount (BEA) applicable to gifts made during life or the BEA applicable on the date of death. So, if you give away up to $11.7 Million this year (the current BEA), and the BEA reverts to $5 Million (plus inflation adjustments that will push it to closer to $6 Million), then the estate can claim the BEA in effect this year since this was the year of the gift. Should the BEA be increased by then, however, then the estate can claim the increased exclusion amount. Whether in the end that is a good tax strategy or financial planning decision in your particular circumstances is something that requires a careful tax analysis and financial advice from a certified financial planner/advisor. There are other considerations beyond worrying about how your assets are taxed after you're gone.
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