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Yearend Use of Exemption – Beware Reserved Attack on Clawback




If assets transferred using a taxable gift are later included in the donor’s estate, generally the donor’s estate tax return may take credit for the use of the lifetime gift tax exemption.  Treasury could issue regulations providing exceptions to this rule, preventing credit for the exemption that was used (“clawback”).  2017 tax reform expressly asked Treasury to issue anti-clawback regulations, which it did.

 However, the Taxation Section of the New York State Bar Association asked the government to provide that those regulations do not prevent clawback regarding certain estate planning strategies.  In response, those regulations reserved the right to attack those strategies.

 Millbank attorney Katie Lynagh wrote an article in Bloomberg BNA’s Estates, Gifts & Trusts Journal describing the strategies at risk of further regulation.  Strategies targeted include:

  • Grantor-retained income trust (GRIT)
  • Preferred partnership not complying with Code § 2701
  • Other strategies using gift tax exemption that result in estate inclusion of the transferred assets

Join her and Steve Gorin as they discuss which strategies are likely to or may be caught if regulations address these tools, as well as which strategies appear safe from that attack.



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