Life Insurance and Annuity Taxation

These flashcards cover key vocabulary related to life insurance and annuity taxation, focusing on tax implications, estate planning, and financial concepts relevant to the lecture.

Federal estate tax

A tax on a person's right to transfer assets at death, often referred to as an 'asset transfer tax'.

Gross estate

The market value of the decedent's interest in all property/assets at the date of death.

Tentative tax base

Calculated by subtracting allowable deductions from the gross estate and adding adjusted taxable gifts.

Death benefits

The money paid out by a life insurance policy upon the death of the insured.

Adjusted taxable gifts

Gifts that are not included in the decedent's estate, net of the annual gift exclusion.

Unified transfer tax credit

A credit against the federal estate tax amount, based on the tentative tax base.

Annual gift tax exclusion

The amount individuals can give away each year without incurring gift taxes, set at $19,000 per donee.

Irrevocable trust

A trust in which the grantor relinquishes any control and ownership of the assets transferred to the trust.

Power of attorney

A legal document allowing one person to act on behalf of another in business or financial matters.

Living will

A document outlining an individual's wishes regarding life-sustaining measures in cases of terminal illness.

Crummey provision

A feature that allows beneficiaries to withdraw contributions to a trust for a limited period to qualify for the annual gift tax exclusion.

Cash value

The amount accumulated in a permanent life insurance policy that can be borrowed against or surrendered.

Tax basis

The value assigned to an asset for tax purposes, used to determine gain or loss upon sale or transfer.

Life insurance policy dividends

Payments made to policyholders as a return of excess premiums, which may be taxable.

Lifetime gifting

The process of transferring assets during an individual's lifetime, which can have tax implications.