The overhaul doubled the estate- and gift-tax exemption, which is a combined amount that applies to an individual’s gifts made during life or assets left at death.
For 2018, the limit rose to $11.18 million per individual and $22.36 million per married couple. For 2019, an inflation adjustment lifts it to $11.4 million per individual and $22.8 million per couple.
This increase in the exemption is set to lapse after 2025. In November 2018, the Treasury Department and the IRS issued proposed regulations that would allow individuals who make large gifts between 2018 and 2025 to retain the tax benefit of the higher exemption, even if it reverts to pre-2018 levels.
Here is a simplified example. Say that John has assets of $11 million, and he gives it to a trust for his heirs in 2019. The transfer is free of gift tax because the exemption is $11.18 million for 2019.
But after 2025 the exemption reverts to its 2017 level of $5.49 million (plus an inflation adjustment), and John dies in 2026. Under to the Treasury proposal, John’s estate wouldn’t owe tax on the portion of his 2019 gift that’s above the 2026 exemption.