On February 20, 2024, Bloomberg Tax quoted Emily Plocki on rushing to take advantage of current estate tax exemptions.
According to the article, wealthy taxpayers are hurrying to use the increased estate tax exemption amount before it potentially expires at the end of 2025.
Republicans’ 2017 tax-cut law doubled the estate tax exemption but built in a 2025 sunset. Those with more than the exemption amount, which stands at about $13.6 million per person for 2024, in gifts or in their estate face a 40% transfer tax.
It’s unclear what the estate tax will look like after 2025, with the future of the exemption and many other 2017 law provisions hinging on the 2024 election. Given the uncertain future of the exemption amount, wealthy individuals are scrambling to lower the value of their estate and make large gifts in the next two years.
“We’re on the shot clock,” said Plocki, about using the elevated exemption. “It’s now or never.”
According to the article, experts are predicting three to four times more gifts this year because of the impending sunset.
“It’s a use it or lose it scenario,” Plocki told Bloomberg Tax. “You have to make large gifts considering what we think the exemption amount will be in 2026 to really take advantage of this opportunity.”
Plocki said those preparing for the sunset should use caution when creating trusts to take advantage of the current exemption amount. There are “strings” that a person creating the trust could attach, she explained, but they run the risk of the IRS deeming it an improper gift—still considering it a part of their estate.
Click here to access the article.