Reg Watch

Sunsetting Estate & Gift · Sunsets 2026-01-01

TCJA Estate Tax Exemption Sunset

The doubled federal estate and gift tax exemption from the 2017 Tax Cuts and Jobs Act is scheduled to revert to pre-TCJA levels on January 1, 2026 (~$7M per person, indexed). Absent new legislation, clients with taxable estates above that threshold lose substantial exemption capacity at year-end 2025.

Advisor move. Review every client with a net worth above $5M. Model gifting strategies (SLATs, GRATs, irrevocable trusts) to use exemption before the sunset. IRS issued anti-clawback guidance in 2019 (Rev. Proc. 2019-20) so gifts made before the sunset generally retain their benefit. Coordinate with estate counsel now — Q4 2025 appointment calendars will fill fast.

Sources: IRS Rev. Proc. 2019-20 (anti-clawback) · IRS Estate Tax page

Active Executive Comp · Effective 2023-04-01

SEC 10b5-1 Plan Amendments

The SEC's 2022 amendments (final rule effective April 1, 2023) impose a mandatory cooling-off period between plan adoption and the first trade: 90 days for officers and directors, 30 days for other insiders. Single-trade plans are limited to one per 12-month period. Overlapping plans are largely prohibited. Enhanced disclosure in proxy statements and Form 10-Q.

Advisor move. Any client who is an executive officer, director, or 10% holder needs a compliant 10b5-1 plan before touching concentrated stock. Adopt during an open trading window. Coordinate the cooling-off timeline with diversification, QSBS, and charitable strategies. Document good-faith adoption in writing.

Sources: SEC Final Rule 33-11138 · SEC press release

Active Capital Gains · Effective since 1993 (OBRA-93)

QSBS §1202 Exclusion — Still $10M / 10x Basis

Qualified Small Business Stock held 5+ years continues to allow exclusion of the greater of $10M or 10x aggregate basis from federal capital gains. Must be original-issue stock from a domestic C-corp with gross assets $50M or less at issuance, active business test satisfied, and not in an excluded industry (financial services, farming, hospitality, etc.). Section 1045 permits rollover into replacement QSBS within 60 days of sale.

Advisor move. For founders and early employees approaching year-5, map the anniversary date and plan liquidity around it. Gift-stacking to non-grantor trusts multiplies the $10M exclusion per recipient. CA, PA, NJ, and MA do NOT conform — state tax still applies. Several proposals in Congress would expand §1202 further; watch for updates.

Sources: 26 U.S.C. §1202 (Cornell) · §1045 rollover · Kitces QSBS writing

Active Advisor Practice · Effective 2022-11-04

SEC Marketing Rule (Rule 206(4)-1)

Consolidated the former Advertising and Cash Solicitation rules. Permits testimonials and endorsements subject to disclosure. Performance advertising requires net-of-fees, standardized time periods, and specific risk disclosures. Third-party ratings and hypothetical performance require distinct disclosures. Enforcement has ramped since 2023; several RIAs have paid six- and seven-figure penalties.

Advisor move. Audit every website, social post, pitch deck, and prospect communication for compliance. Any testimonial needs: (1) disclosure of whether compensated, (2) disclosure of conflicts, and (3) clear, prominent presentation. Hypothetical or backtested performance requires heightened disclosures. Document your Marketing Rule compliance review annually.

Sources: SEC Release IA-5653 (final rule) · SEC Marketing Rule FAQ

Monitoring Retirement · Enacted 2022-12-29

SECURE 2.0 Act Implementation Timeline

The SECURE 2.0 Act (Dec 2022) phases in provisions through 2033. Key HNW-relevant items: RMD age raised to 73 (2023) then 75 (2033); Roth catch-up mandated for high earners age 50+ (delayed to 2026 by IRS); 529 → Roth IRA rollovers up to $35K lifetime; SEP-IRA and SIMPLE Roth options; QLAC limits expanded to $200K.

Advisor move. Update client RMD calendars — anyone turning 72 in 2023 or later has extra time. For high-earning clients age 50+, the mandatory-Roth catch-up starts Jan 2026; model the tax impact now. For clients with overfunded 529s, the Roth rollover option opens planning space for next-gen wealth transfer.

Sources: H.R. 2617 (Consolidated Appropriations Act 2023) · IRS Notice 2023-62 (catch-up delay) · IRS Notice 2024-02

Watching Tax Policy · Proposed 2021, recurring

Proposed Changes to Carried Interest & Grantor Trust Rules

Multiple legislative proposals periodically surface targeting grantor-trust mechanics (SLAT, GRAT, IDGT) and the taxation of carried interest. The Build Back Better framework (2021) and subsequent drafts included provisions that would have substantially curbed estate-planning use of grantor trusts. None of these have passed, but they resurface with each tax-policy cycle.

Advisor move. Treat grantor-trust strategies as "use now or lose later." Complete GRAT fundings, SLAT structures, and IDGT sales well before any anticipated legislative vehicle. Document pre-enactment execution carefully. Alert PE and hedge fund clients to the periodic carried-interest debates.

Sources: Kitces on BBB grantor-trust proposals · H.R. 5376 (BBB, history)

Active Estate · Effective 2022-01-01

Corporate Transparency Act — Beneficial Ownership Reporting

FinCEN's CTA requires most LLCs, corporations, and similar entities to report beneficial ownership information. HNW clients with family LLCs, management companies, and holding structures are in scope. Initial reports were due January 1, 2025 for pre-2024 entities (subject to ongoing litigation and injunctions — status fluid). Penalties: $500/day up to $10,000, with criminal exposure for willful violations.

Advisor move. Inventory every LLC and entity in the client's structure. Confirm which require reporting, and which are exempt (public cos, large operating cos, banks). Coordinate with estate counsel for ongoing updates when ownership changes. Track the current enforcement status — this has flipped multiple times.

Sources: FinCEN Beneficial Ownership Information (status) · 31 U.S.C. §5336

Watching Philanthropy · Introduced 2021 (ACE Act S.1981)

Donor-Advised Fund Payout Proposals (ACE Act & Successors)

The Accelerating Charity Efficiency Act and subsequent proposals would impose a 15-year payout requirement on DAF contributions, with sponsor-level penalties for non-distribution. No proposal has advanced past committee, but pressure from academic research and certain philanthropy-reform advocates persists.

Advisor move. Clients using DAFs for very long-horizon giving should consider diversifying into private foundations (5% payout, but more control) or CRTs (guaranteed remainder). Active DAF strategy users won't be affected immediately, but be ready to pivot if legislation moves.

Sources: ACE Act S.1981 (117th Congress) · ACE Act explainer (Chronicle of Philanthropy)

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