IRC §2035 · 26 U.S.C. §2035
IRC §2035: Gifts Made Within 3 Years of Death
IRC §2035 pulls back certain gifts made within 3 years of death — transferred life insurance, relinquished powers, and gift tax paid. The deathbed-transfer clawback.
What it governs
- Life insurance transferred within 3 years of death returns to the gross estate
- Relinquished incidents of ownership and retained powers get the same 3-year lookback
- Gift tax paid on gifts within 3 years is added back to the gross estate
- Annual-exclusion gifts are untouched — only taxable transfers trigger §2035
In the GuideFull treatment in Chapter 15 of the Guide — THE TAX CUTTERY® Guide to Federal Income Taxation, Professional Edition (564 pages, 24 chapters).
Related sectionsIRC §2042 — the insurance-inclusion rule §2035 enforces · IRC §2036 — retained interests with no 3-year limit at all
From the practiceStart the consultation — Paul on video, one question at a time →
Questions this section answers
- I gave my life insurance to an ILIT last year and died — is it in my estate?
- Yes — §2035(a)(2) pulls insurance transferred within 3 years of death back into the gross estate. Fund ILITs early.
- Does §2035 claw back my annual-exclusion gifts?
- No — only transfers that would have been in the estate (insurance, retained interests) plus the gift tax paid on them. Exclusion gifts are safe.
- Why is gift tax paid added back?
- To prevent deathbed gifts from shrinking the estate with the tax payment itself — §2035(b) grosses the estate back up.
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The Guide treats 149 Code sections across 24 chapters — every claim verified against primary sources.
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