Now is a good time to consider how gifting strategies may fit within your estate plan. For high net worth individuals, the scheduled sunset of the Tax Cuts and Jobs Act of 2017 should be of particular concern.
On December 31, 2025, the Tax Cuts and Jobs Act (“TCJA”) is scheduled to sunset, reducing the federal unified gift and estate tax exclusion (or “unified tax credit”) from its current level of $12.92 million, to its 2017 level of $5 million, adjusted for inflation. In 2019, the Treasury Department released final regulations creating the so-called “anti-clawback rule,” which states that subject to certain exceptions, a decedent’s estate may use the unified credit amount in effect during the year of gift, rather than the date of death.
For example, if an individual makes gifts totaling $9 million now and the unified tax credit becomes $7 million in 2026, then such individual has moved an additional $2 million out of their estate, tax free. Please note that this can get complicated quickly, and therefore, should only be done with the advice of an expert estate planning attorney and accountant.
Nevertheless, high net worth individuals should immediately consider revisiting their estate plans, and using gifting strategies to take advantage of the current high exclusion amount. In the event such individuals are Oregon or Washington residents, they further benefit from the absence of gift tax at the state level (unfortunately, Oregon still has an estate tax for estates valued over $1 million, and Washington still has an estate tax for estates valued over $2.193 million).
It should be mentioned that Congress may choose to extend the TCJA any time before it sunsets in 2026; or there may be new legislation. Either way, individuals who wait to see what will happen in 2026 are at risk of running out of time to put an estate plan in place that takes advantage of the currently high unified gift and estate tax exclusion. Now is the time to contact your team of advisors, such as your attorney, your accountant, and your financial advisor, to put a holistic plan in place to help make any sunset what it should be—spectacular.
If you have estate planning questions and need legal assistance, please contact Ryan K. Richardson at 503-620-8900 or visit our website at www.buckley-law.com.
This article was published in the March 31, 2023 Portland Business Journal’s 2023 Estate & Charitable Planning Guide.
Ryan K. Richardson
Ryan K. Richardson practices business law, business formation, estate planning, and business succession at Buckley Law P.C. He is an attorney and shareholder at Buckley Law and is licensed in Oregon, Washington, and California.
The information contained in this article is for informational purposes only and does not constitute legal advice. This information is not intended to create an attorney-client relationship, and the receipt or viewing of it does not create or constitute an attorney-client relationship. You should not act upon any information contained in this article without consulting an attorney for individual advice regarding your own situation.