Gift-Splitting for Transfers to TrustsGift-Splitting for Transfers to Trusts

Many clients and their advisors are busy planning for the impending reduction of the applicable exclusion amount (AEA) scheduled for Jan. 1, 2026. The AEA has ranged from less than $1 million in 2000 to $13.61 million today. In 2011, Congress set the AEA at $5 million with subsequent annual inflation adjustments. In 2017, the Tax Cuts and Jobs Act temporarily added $5 million to the 2011 amount (continuing to be adjusted for inflation annually). On Jan. 1, 2026, the AEA will revert back to $5 million, adjusted for inflation since 2011. 

To capitalize on the potentially disappearing AEA, many advisors counsel their clients to make significant lifetime gifts now. One of the primary techniques recommended to married couples is for one spouse...