President Donald J. Trump signed into law H.R.1 (known as the “Tax Cuts and Jobs Act” and hereinafter referred to as the “Act”). The Act made certain modifications of the gift and estate tax exemption. In general, under prior law, US citizen or residents are subject to US gift and estate taxation subject to an exemption amount. The exemption amount was set at $5 million for 2011 and is indexed for inflation for later years. For 2017, the inflation-indexed exemption amount is $5.49 million. The exemption used during life to offset taxable gifts reduces the amount of exemption that remains at death to offset the value of a decedent’s estate. The Act doubles the estate and gift tax exemption for estates of decedents dying and gifts made after December 31, 2017, and before January 1, 2026.*1 This is accomplished by increasing the exemption amount from $5 million to $10 million. The $10 million amount continues to be indexed for inflation occurring after 2011. The provision is effective for estates of decedents dying and gifts made after December 31, 2017. Of particular importance is that the doubling of the exemption amount expires for tax years 2026 and beyond. In addition, the provision could be modified before then depending on the political party in power. Therefore, we recommend that clients take advantage of this provision and reevaluate their gift and estate planning needs.
*1 For your convenience, we have included Section 11061 of the Act.