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December 14, 2018

IRS Clarification of Rules Regarding Large Lifetime Gifts

Please read important disclosures HERE.

The 2017 Tax Cuts and Jobs Act included a significant increase in the exclusion amount for estates and tax-free lifetime gifts. In 2019, the estate and gift tax exclusion amount will be set at $11.4 million per person and double that for a married couple. However, this increased exclusion amount is set to expire at the end of 2025, at which time the limit is scheduled to revert to 2017 amounts — roughly $5.5 million per person and $11 million per married couple.

Clarification of Rules Regarding Large Lifetime Gifts

Even with the increased gift and estate exclusion amounts, individuals have been concerned that making large tax-free gifts now could still generate an estate tax bill if their death occurs after the changes expire at the end of 2025. For example, if an individual makes a $10 million tax-free gift now and dies in 2026, his or her lifetime gifts will have exceeded the lower estate and gift exclusion amount scheduled to be in effect in 2026 by $4.5 million — and that excess amount could have been brought back into his or her gross estate for estate tax purposes.

A Trump administration proposal released by the IRS on November 23, 2018 addressed this “clawback” issue. The proposed regulations ensure that a decedent’s estate will not be inappropriately taxed with respect to gifts made during the increased exclusion amount period. In other words, tax-free gifts made from 2018 through 2025 will be excluded from the estate tax calculation regardless of when the individual dies.

Individuals who have already given away pre-2018 gift exclusion amounts (approximately $5.5 million) can now make additional gifts of securities, real properties, and interests in family businesses as well as forgive loans without concern of a clawback. Those individuals who have not made lifetime gifts exceeding $5.5 million but whose tax situations may benefit from removing income and appreciation of assets from their taxable estates can also consider gifting strategies to reduce their tax liability.

The new rules will not be effective until after a public hearing scheduled for March 13, 2019, when comments will be heard and the regulation will likely be made final.

If you are interested in learning more about lifetime gifting opportunities, please contact your B|O|S advisor team to review your financial situation.


This memorandum provides a general overview of a particular estate planning topic and is not intended to be an exhaustive summary of every practical element of that topic. Many important elements of each subject are not discussed herein. This memorandum is for informational purposes only and is not intended to be used as a general guide to estate planning or as a source of any specific recommendations, and makes no implied or express recommendations concerning the manner in which any individual’s account should or would be handled, as appropriate estate planning strategies depend upon the individual’s specific objectives and circumstances. It is the responsibility of any person or persons in possession of this material to inform himself or herself of and to seek appropriate advice regarding any investment, financial planning, or estate planning decisions, legal requirements, and taxation regulations which might be relevant to the topic of this article or the subscription, purchase, holding, exchange, redemption or disposal of any investments.

Estate planning law changes frequently and the information presented within may no longer be current. Please do not rely on the information provided herein without first consulting an attorney.

This memorandum does not constitute a solicitation in any jurisdiction in which such a solicitation is unlawful or to any person to whom it is unlawful. Moreover, this memorandum neither constitutes an offer to enter into an investment agreement with the recipient nor an invitation to respond by making an offer to enter into an investment agreement.

Opinions expressed are current opinions as of December 2018 and are subject to change. No part of this material may, without the prior written consent of Bingham, Osborn & Scarborough, LLC, be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient.

Filed under: Financial Planning

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