Gifts exceeding the annual gift tax exclusion can fall under the lifetime estate and gift tax exemption, but you must file a timely gift tax return. For example, if one of your children is having financial issues, you should first maximize your annual exclusion and then apply gift amounts over that limit against the lifetime exemption.
The lifetime exemption is $11.4 million for 2019. Before the Tax Cuts and Jobs Act (TCJA), the limit was $5.49 million in 2017. Unless made “permanent,” the current exemption amount will expire at the end of 2025 and the exemption could go back to the pre-TCJA limit.
The IRS combines the estate and gift tax exemption for a total exemption of $11.4 million. In other words, if you do not use any of the gift tax exemption while you are alive and you die in 2019, your estate will have the full $11.4 million estate tax exemption. If you use $4 million of the gift tax exemption while you are alive and you die in 2019, your estate will have a $7.4 estate tax exemption remaining. In this way, the federal estate and gift tax exemption is considered to be a “unified” tax.