By: Eric R. Kaplan
The Internal Revenue Service recently issued Internal Revenue Bulletin 2026-35, the purpose of which is to set forth inflation-adjusted items for the 2027 calendar year for various Internal Revenue Code provisions. With respect to estate planning matters, the following are important items of which practitioners (and their clients) should take note:
A. Applicable Exemption Amount. The applicable exemption amount is the amount a taxpayer can give away during life or at death and not incur any gift or estate tax. The applicable exemption amount may also include the unused applicable exemption amount of an individual’s last deceased spouse (provided that “portability” is elected by filing IRS Form 706 (Federal Estate Tax Return), and the deceased spouse was a U.S. citizen or resident). For this purpose, the 2027 exemption amount is $15,480,000 (increased from $15,000,000 during 2026). To the extent the applicable exemption amount is not used up by lifetime gifts, what remains will apply to transfers at death. If lifetime gifts or death-time transfers exceed the applicable exemption amount (or the unused portion thereof), any applicable tax is calculated at a 40% tax rate with respect to the excess amount. Notwithstanding the foregoing, if a husband and wife “gift-split” or are gifting each spouse’s respective assets, this exemption amount can be doubled to $30,960,000 (increased from $30,000,000 during 2026).
B. Annual Exclusion—Non-U.S. Citizen Spouse. Gifts between U.S. spouses can be made to an unlimited extent, without any gift or estate tax consequences. However, if the recipient is not a U.S. person, then a $201,000 annual exclusion applies during 2027 (increased from $194,000 during 2026).
C. Gift Tax Annual Exclusion. This exclusion is the amount a person can give away to an unlimited number of individual recipients each year without any resulting gift tax consequences. During 2027, the gift tax annual exclusion increases to $20,000 (or $40,000 with “gift-splitting” by spouses) (increased from $19,000 for an individual and $38,000 for “gift-splitting” by spouses during 2026).
D. Generation-Skipping Transfer Tax Exemption. This exemption is the amount that can pass free of the 40% generation-skipping transfer tax over one’s lifetime. Without this exemption, transfers to a grandchild or more remote individual (or a trust whose beneficiaries are comprised of only such persons) may be subject to this tax. During 2027, the exemption amount is $15,480,000 per donor/decedent (increased from $15,000,000 during 2026). Unlike the estate tax exclusion amount, however, the generation-skipping transfer tax exemption cannot be used by a surviving spouse, unless special language is added to one’s estate planning documents.
E. Foreign Gift Reporting Threshold. A gift from a foreign person must be reported by the donee if it exceeds a certain value. During 2027, the threshold amount is $100,000 for aggregate gifts made during the year from a foreign donor. The IRS Form 3520 with respect to any purported gifts made (in the aggregate) via a transfer from a foreign partnership or foreign corporation, however, has a lower threshold, but such threshold has been raised for reporting purposes during 2027 to $21,240.31 (increased from $20,573 during 2026).
F. Foreign Earned-Income Exclusion. During 2027, the first $137,300 in income earned abroad by an individual is excluded from taxable income for U.S. income tax purposes (increased from $132,900 during 2026).
This publication is provided by Greenspoon Marder LLP is issued for informational purposes only and is not intended to be construed or used as general legal advice nor a solicitation of any type. Please contact the author(s) or your Greenspoon Marder LLP contact if you have any questions regarding the currency of this information. The hiring of a lawyer is an important decision. Before you decide, ask for written information about the lawyer’s legal qualifications and experience.
