Tax Cuts and Jobs Act (TCJA)

When the Tax Cuts and Jobs Act (TCJA) was passed in late 2017, December 31, 2025 seemed so far away. But in just over two years, the current gift and estate-tax exemptions of $12.92 million per person ($25.84 million for married couples) are currently scheduled to be reduced to $5 million per person ($10 million for married couples), plus indexing, starting in 2026.  For planning purposes, the exemption is projected to be roughly cut in half, perhaps from $14 million in 2025 to $7 million in 2026.

Example
What happens if there’s “Gift Planning” vs. “No Planning” as of January 1, 2026?  Take the example of Alice and John, a couple with a net worth of $50 million. 

No Claw-back
On November 26, 2019, the IRS clarified that individuals taking advantage of the increased gift tax exclusion amount in effect from 2018 to 2025 will not be adversely impacted after 2025 when the exclusion amount is scheduled to drop to pre-2018 levels. The IRS formally made this clarification in final regulations released that day.

Next Steps
For high-net-worth taxpayers, the time to explore planning opportunities is now. Taxpayers are strongly encouraged to meet with their estate planning and tax professionals as soon as possible to discuss and implement tax-efficient estate plans if their goal is to ultimately pass on  more of their wealth to their heirs.

Contact us to learn more.