New 2010 Regs Confirm: No Clawback, Use it or Lose it

When the Tax Cuts and Jobs Act increased the individual exclusion amount from $5 million to $11.18 million, it reiterated the fact that the increase was temporary, and would revert back to $5 million in 2026 unless Congress made the increase permanent. What was not explained in its passage, however, was what would occur if a person made a gift after January 1, 2018 but prior to December 31, 2025 over $5 but less than $10 million, the exclusion reverted to $5 million, and the person died after the reversion. Instead Congress asked the Treasury Secretary to figure out the answer.

The new Internal Revenue Service has published Regulations 106706-18, which will rectify this issue that concerned several tax practitioners. This clears a significant roadblock that may have given some hesitation on making large gifts above $5 million, but it also opens the door to possible malpractice risks if married clients are not advised  on the perils of separate gifts or gift splitting.

It may still be beneficial to wait until making large gifts until closer to 2025 to see if Congress makes the exclusion amounts permanent.

See Edwin Morrow III, New 2010 Regs Confirm: No Clawback, It’s Use it or Lose it, Linkedin.com/pulse, November 21, 2108.

Special thanks to Jim Roberts (Dallas, Texas Estate Planning Attorney) for bringing this article to my attention.

Special thanks to Jody R. Lowe (President, The Lowe Group) for bringing this article to my attention.

Special thanks to Russell A. Willis III (Planned Gift Design Services, Tucson, Arizona) for bringing this article to my attention.