On November 22, 2019, the IRS issued final regulations on the increased estate tax exemption introduced in the Tax Cuts and Jobs Act (TCJA). The TCJA raised the federal exemption for estate tax from $5.45 million to $11.4 million for 2019 ($11.58 million for 2020) but stipulated that the provision will sunset in 2026 and revert back to the 2017 amount (adjusted for inflation to approximately $6 million).
The new regulations confirm that gifts made while the increased exemption is in effect will not be “clawed back” into a taxpayer’s estate if they die after the law sunsets. This is very good news for taxpayers who want to realize the full benefit of the increased exemption without fear of future penalization of their estate and beneficiaries.
Keep in mind that the results of the 2020 election could put this benefit in jeopardy much sooner than 2026, so it’s important to speak to your tax advisor now if you want to take advantage of these unprecedented estate tax savings opportunities.