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Estate Tax Clawback

The recently passed tax reform bill required Congress to make several compromises because of budget limitations in the amount the bill could add to the deficit and avoid a possible filibuster by Democratic senators.

Those limitations prevented a complete elimination of the estate tax, as had long been proposed by Republicans in government.

The estate tax exemption has now been doubled.  However, this could not be made permanent and the exemption is scheduled to revert back to its previous level in 2026.

This creates a potential issue for some estates, as Wealth Management discusses in “Clawback Under New Tax Law.”

The issue is what to do if someone in 2018 uses the doubled exemption to make gifts and thus uses up their lifetime exemption under the current law, but then passes away after the exemption limits have reverted to previous levels.  The exemption limit to use for the estate is unknown. It is possible that gift amounts over the exemption limit in place at the time the person passes away, could be clawed back into the estate for estate tax purposes.

Instead of deciding how to handle this issue, Congress has authorized the IRS to decide what to do.

It is possible the agency will decide that there should be clawbacks. Therefore, for now people need to be wary and talk to advisors before gifting too much.

Reference: Wealth Management (Dec. 28, 2017) “Clawback Under New Tax Law.”

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I heard Cindy’s presentation at a Senior Luncheon at my church, and was very impressed. She helped my daughter and me understand many aspects of elder law. Josh has also been very helpful in my planning to enter an independent living situation . I have told many friends about them.

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The very best elder law attorney and staff anyone could ever ask for! I have referred a number of clients to Cindy and she never disappoints. She is kind, caring, and extremely thorough in making sure everything is completed as it should be. I highly recommend Cindy for anyone needing lawyer services; she truly goes above and beyond for every client she helps and has had a huge impact in so many peoples’ lives. Thank you, Cindy and staff, for everything that you do- I’m so glad to know you!

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