What is the lifetime exemption?

Each taxpayer is entitled to make use of the lifetime exemption to reduce the amount of gift and estate taxes owed by their estate. ATRA set the lifetime exemption amount at $5 million, to be adjusted for inflation each year; however, President Trump signed tax legislation into law that significantly increased the lifetime exemption amount for 2018 and for several years to come. These exemption amounts are scheduled to increase with inflation each year until 2025. On January 1, 2026, the exemption amounts are scheduled to revert to the 2017 levels, adjusted for inflation. The temporary increase in the lifetime exemption amount presents an opportunity for those with significant taxable assets to transfer more of that wealth without incurring taxes over the next few years.