Lifetime Exemption – Is now the time to Make gifts?

by Matt Schwartz

During an election year, it is natural to relate your profession to the Presidential election.  At Schwartz Montoya Legal, we are considering for our clients what they should do between now and the end of 2025 when the expanded estate and gift tax exemption under the Tax Cuts and Jobs Act of 2017 is scheduled to expire.

If the Tax Cuts and Jobs Act expires, then the unified estate and gift tax exemption will be reduced in half.  Current projections would be that the exemption per person may be reduced from roughly $14,500,000 (2026 inflation adjusted if no reduction in the exemption) to $7,250,000 if there is a reduction in the exemption.

So, what does that mean for someone who has $5,000,000 or more in assets now and is in a position where their assets are likely to grow rather than to shrink during the balance of their lifetime.

If you fall into this category of people, the prospect of a reduced estate planning exemption should be an incentive for you to give away more assets now.  The benefits of giving away more assets now are as follows:

  1. No Clawback on Large Completed Gifts– Suppose that you are not married and have two children and two grandchildren.  Further suppose that you were able to transfer $2M of after-tax stocks and bonds to each of them before 2026.  Currently, you have enough exemption to protect you from estate tax since the 2024 exemption is $13,610,000.  However, if the exemption is reduced in half in 2026, the exemption may only be in the low $7M range.  There was a concern that the IRS would tax the gift to the extent that it exceeded the reduced exemption at the time of your death.  The IRS eliminated this concern for completed gifts by adopting the anti-clawback rule in final regulations in 2019.  The anti-clawback rule states that the taxpayer at the time of his or her death will get to use the exemption amount in place at the time of the gift rather than the potentially smaller exemption amount at the time of death.
  2. Get Appreciation Out of Your Estate – In the above example, the $8M that was transferred by gift could have doubled to $16M in the donor’s estate if the donor did not transfer the assets by gift before the donor’s death.  Therefore, the value of getting the assets out of your federal estate was potentially the estate tax that would have been due on $8M ($3,200,000 based on a 40% estate tax).  In addition, the Pennsylvania inheritance tax savings assuming that you live more than a year from the gift would be 4.5% of the amount of the $8M gifts plus avoiding 4.5% on the $8M that the assets would have otherwise appreciated in your estate.   We can never recover the value of that advice on an hourly basis but I wanted to illustrate the idea.
  3. Positive Non-Tax Benefits of Getting Assets to Family Now – By transferring wealth to family now, you are giving them the opportunity to be less stressed about money and be more focused on what they truly love to do.  In addition, the transfer of wealth during lifetime provides opportunity for financial education for the beneficiaries to maximize the chances that they will preserve the financial legacy that you have grown for your family.

Next Steps

If you are in a situation where you want to make sure that you benefit from the higher exemption amounts that are only currently guaranteed through the end of next year, I recommend that you contact Schwartz Montoya Legal to schedule a consultation with John or me to discuss which planning techniques may be best for your situation.  You may be a good candidate to transfer assets to your children in a trust that gives them some autonomy while helping to keep assets in the bloodline.  Alternatively, you may want to leave assets to your spouse in a Spousal Lifetime Access Trust and have those assets pass to your children when your spouse passes away as a way to give you and your spouse access to those assets while your spouse is alive but to assure that those assets will get transferred to your children after your spouse passes away.  There are many other possibilities as well.

We look forward to hearing from you and thank you for your support. If you would like to schedule a meeting, please call or text us at (412) 419-1005 or email us at

Photo by Alexander Schimmeck on Unsplash

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