A high-net-worth couple holding a combined estate of \$14.5 million sits well within the elevated TCJA exemption that has applied since 2018 (IRC §2010(c), as raised by §11061 of P.L. 115-97, roughly \$13.61 million per spouse in 2024, indexed annually). The couple assumes federal estate tax is not a planning concern. The TCJA sunset provision under §11061(c) is scheduled to revert the exemption to its pre-TCJA level adjusted for inflation, approximately \$6.7 million per spouse, on the cutoff date set in the original statute. The same couple, same estate, becomes exposed to roughly \$1.1 million of federal estate tax overnight on the reversion date.
The sunset is statutory and has been on the books since the TCJA passed in December 2017. Whether legislative action will extend the higher exemption has been the subject of recurring political negotiation. Regardless of outcome, the planning posture for high-net-worth taxpayers has been the same throughout: act as if the sunset will occur, and use the pre-sunset window to deploy specific strategies that lock in the elevated exemption before reversion. The Treasury’s anti-clawback regulations finalized in 2019 (Treas. Reg. §20.2010-1(c)) confirmed that gifts made under the higher exemption stay sheltered even if the exemption later drops, which is the structural foundation that makes the pre-sunset gifting strategies meaningful in the first place. Three moves work and have held their value through the negotiation cycle. This article walks each.
The anti-clawback rule that makes pre-sunset gifting work
The fundamental question for any pre-sunset gifting strategy is whether a gift made under the current \$13.61M exemption gets “clawed back” if the exemption later drops to \$6.7M. Without an anti-clawback rule, a \$10M gift made in 2024 using the higher exemption would face a \$3.3M clawback when the estate later applies the lower 2026+ exemption to the lifetime gifting credit. Treas. Reg. §20.2010-1(c), finalized in November 2019, addressed this directly: gifts made under the higher exemption do not get clawed back if the exemption later decreases. The lifetime gifting credit applied at the time of the gift is the credit that matters.
The anti-clawback rule is the foundation. It is what makes pre-sunset gifting strategies meaningful, without it, the strategies would be paper exercises.
Move one: lifetime gifting up to the current exemption
The most direct pre-sunset move is using the additional exemption capacity before it disappears. A taxpayer who has not previously made gifts beyond the annual exclusion has roughly \$13.61M of lifetime exemption available in 2024 (and slightly more in 2025 after the annual inflation adjustment). After January 1, 2026, that available exemption drops by roughly half.
The mechanical strategy: make a gift before December 31, 2025, that uses some or all of the additional ~\$6.9M of exemption that the higher 2024-2025 amount provides above the projected post-sunset baseline. The gift can be in the form of cash, marketable securities, real estate, business interests, or any other property. The gift consumes lifetime exemption; the §20.2010-1(c) anti-clawback rule preserves the shelter; the underlying gifted property (and all future appreciation on it) is removed from the donor’s estate.
The friction points: the gift is irrevocable; the donor loses control over the gifted property; the donor cannot retain a beneficial interest without triggering §2036 estate-inclusion rules. Most high-net-worth taxpayers structure the gift through a trust (typically a non-grantor irrevocable trust) that holds the gifted property for the benefit of children, grandchildren, or other beneficiaries.
Move two: the spousal lifetime access trust (SLAT)
The SLAT structure addresses the loss-of-control problem that limits direct gifting for many high-net-worth couples. In a SLAT, one spouse (the donor-spouse) gifts assets to an irrevocable trust for the benefit of the other spouse (the beneficiary-spouse) and possibly other descendants. The donor-spouse uses their lifetime exemption; the beneficiary-spouse can receive distributions from the trust as needed during the donor-spouse’s lifetime, providing indirect access to the gifted assets through the marital relationship.
A common variation is the reciprocal SLAT, where each spouse establishes a SLAT for the other. The reciprocal structure has historically been used to allow both spouses to use their respective exemptions before the sunset, while maintaining indirect access to the gifted assets through the spousal beneficiary relationship. The reciprocal-trust doctrine (originating in Estate of Grace, 395 U.S. 316 (1969)) requires careful drafting to avoid the IRS treating the two trusts as economically equivalent and uncrossing them for estate-inclusion purposes, but the doctrine is well-developed and the planning is mainstream.
SLATs are time-sensitive. After the sunset, the same gift consumes a much larger fraction of the (lower) exemption, and the planning becomes harder to justify against the donor-spouse’s reduced future flexibility. Pre-sunset deployment is the operative window.
Move three: the GRAT for taxpayers with appreciating assets
A grantor-retained annuity trust (GRAT) under IRC §2702 transfers future appreciation on contributed property to beneficiaries while the grantor retains an annuity stream over a fixed term. The grantor’s gift-tax cost is the present value of the contributed property minus the present value of the retained annuity, computed using the §7520 interest rate published monthly by the IRS. If the contributed property appreciates at a rate exceeding the §7520 rate over the GRAT’s term, the excess appreciation transfers to the beneficiaries free of additional gift-tax exposure.
The pre-sunset urgency for GRATs is different from the lifetime-gifting urgency: GRATs use very little of the lifetime exemption when structured as “zeroed-out” GRATs (the present value of the retained annuity equals the value of the contributed property, producing a near-zero taxable gift). The strategy doesn’t depend on the higher exemption; it depends on the §7520 rate environment. When §7520 rates are low and the underlying assets are appreciating, GRATs are highly efficient. The pre-sunset urgency here is that legislative proposals have repeatedly targeted GRATs for restriction or elimination, including minimum 10-year terms and minimum 25% remainder requirements, and the political environment for those proposals shifts with the broader tax-legislation cycle.
What about taxpayers below the post-sunset exemption?
For taxpayers whose total estate is comfortably below the post-sunset exemption (~\$6.7M per spouse), the sunset is not directly consequential. The strategies above target taxpayers whose estates are above the post-sunset exemption but below the elevated exemption, the population for whom the reversion moves estate-tax exposure from “not a planning issue” to “a meaningful tax.” Future appreciation, future inheritance, or future business growth can push estates above the post-sunset threshold before death even when they sit below it today, and the pre-sunset gifting window allows locking in the higher exemption to shelter that anticipated future appreciation.
How the political-negotiation outcome interacts with the planning
The TCJA extension and various competing tax-policy proposals have addressed whether the elevated exemption should be made permanent, partially extended, or allowed to sunset on schedule. The planning posture most advisors have taken throughout the negotiation cycle is the same: deploy strategies that benefit the taxpayer if the sunset occurs, and structure those strategies flexibly enough that they don’t produce a worse outcome if the higher exemption is preserved. The pre-sunset gifting moves above satisfy both conditions, the gifted assets are removed from the estate regardless of how the exemption ultimately resolves, the §20.2010-1(c) anti-clawback rule preserves the gift-time exemption credit, and the underlying tax outcome generally improves with the gifting strategy even if the higher exemption is later extended.
The taxpayers who benefit most from this planning are those who use the elevated-exemption window rather than waiting for the legislative resolution. The strategies work and have continued to work through the political-cycle uncertainty.
The downside of doing nothing
The cost of waiting through the planning window quantifies cleanly. A couple with the \$14.5M estate from the opening example, facing approximately \$1.1M of federal estate tax exposure under the post-sunset exemption, has a present-value cost-of-inaction in the hundreds of thousands of dollars. State estate taxes layer on top in jurisdictions that impose them, Massachusetts, Oregon, Washington, and several others have separate state-level estate taxes with substantially lower exemption thresholds (Massachusetts at \$2M, Oregon at \$1M, Washington tiered from \$2.193M). The Form 706 filing complexity and the executor-administration burden also scale with estate-tax exposure. The proactive planning is materially less expensive than the reactive estate-tax exposure that follows from inaction.
Authority: IRC §2010 (unified credit against estate tax); IRC §2010(c)(3)(C) (TCJA sunset of higher exemption, scheduled for end of 2025); Tax Cuts and Jobs Act of 2017 §11061 (P.L. 115-97, exemption raise); Treas. Reg. §20.2010-1(c) (anti-clawback rule, finalized 2019); IRC §2702 (GRAT special-valuation rules); IRC §2036 (gifts with retained life estate); IRC §2001 (estate tax computation); IRC §7520 (interest rate for retained-interest valuation); Form 706 (United States Estate Tax Return); Form 709 (Gift Tax Return); Estate of Grace v. United States, 395 U.S. 316 (1969) (reciprocal trust doctrine); Rev. Proc. 2024-40 (annual inflation adjustments for exemption amounts).