The tax reform legislation raised the estate tax exemption thresholds.
This increase expires at the end of 2025. Does it mean for sure that the exemptions are fixed till 2025?
What if another administration takes control before that, can they change these estate tax exemption thresholds immediately? (before 2025?)
In theory they could. But it's highly unlikely. Since the estate
tax was first implemented in 1916, any changes since then have only
reduced the tax and/or increased the lifetime exemption.
There is a new regulation that is supposed to ameliorate the effects
of reducing the lifetime exemption in 2025. I've read it many times
and I find it very poorly written. But what it appears to say is
that, for estates of decedents who die after 2025, the lifetime
exemption amount will be either the amount specified in the code at
the time of death ($5 million plus inflation adjustment), or the
total amount of post 1976 gifts, whichever is less, but not more than
the pre-2025 lifetime exemption amount.
In other words, if a gift is exemption under the lifetime exclusion
at the date of the gift, it will not be brought back into the taxable
estate even if it exceeds the lifetime exemption at the time of
The upshot is that if someone doesn't exceed the post 2025 lifetime
exemption during his life pre-2025, the new regulation does nothing,
and the pre-2026 increased lifetime exemption will have been of no
use or benefit at all.
The estate tax exemption thresholds are written into law and can not be
changed without Congress agreeing and passing legislation to make the
The "estate tax exemption threshold" is really an "estate and gift tax
exemption threshold". If your plan is to make huge gifts between now and
the end of 2025 to use up the temporarily large exemption but not die
until after 2025 (after the exemption is reduced), there is some
uncertainty as to the eventual gift/estate tax implications. The IRS
recently issued regulations on this topic that are favorable to people
who wish to make huge gifts before 2026 but not die before the end of
2025. The logic and legal analysis in the regulation seems less than
ironclad so it is possible a new administration (without consent of
Congress) could revisit the issue, conclude the current regulation is
wrong, change the regulation, and have the result hold up in court.
This seems unlikely to me but who knows...........