As 2018 gets going and the recently passed new tax rules apply, I'm considering how things will play out. The new tax law is a veritable smorgasbord of new rules, some with far reaching impacts.
The increase in the lifetime estate exemption amount from $5.6mil to $11.2mil per person ($22.4mil per couple) is just such a game changer for many high net worth clients. This new, higher exempted amount has a sunset provision to limit its effects after 2025. Yet, with the exemption amount having risen multiple times in the past decade, the original $600k exemption from a decade ago is nearly twenty times that today. The direction is clear toward larger exempted amounts, and, as is often the intent, the backlash from taking away a benefit in the future sometimes results in a permanent codification. This happened when IRA gifts to charity (capped at $100,000 annually) became a temporary provision that renewed year after year, until it too was codified as permanent in 2015.