Estate and Gift Taxation

These flashcards cover key concepts related to estate and gift taxation, including definitions and implications for taxation.

Estate Tax

A tax imposed on the transfer of the estate of a deceased person, primarily affecting wealthy families with assets exceeding $15 million.

Gross Estate

The total value of all assets owned by an individual at the time of their death, including cash, securities, real estate, insurance, and trusts.

Unlimited Marital Deduction

A provision that allows a spouse to transfer any amount of assets to the other spouse without incurring estate tax, applicable only under certain conditions.

IRS Form 706

The form used to report estate tax liability to the IRS, which must be filed within nine months of a person's death if estate tax is owed.

Gift Tax

A tax applied to an individual who gives money or property to another, exceeding an annual exemption amount of $19,000 for the year.

Adjusted Gift

A gift added back into a decedent's estate for tax calculation purposes if it was given within three years of death.

Step-Up in Basis

A tax provision that allows an heir to inherit an asset at its fair market value at the time of the decedent's death, potentially avoiding capital gains tax.

Look-Back Period

A period during which gifts made prior to death may be included in the gross estate for tax computation; currently set at three years.

RMD (Required Minimum Distribution)

The minimum amount that must be withdrawn from a retirement account, such as an IRA, beginning at age 73.

Gift Splitting

A tax strategy that allows married couples to combine their annual exclusion amounts, effectively doubling the amount they can give to a recipient without incurring gift tax.

Penalty for Excess Contributions

A 6% tax applied to excess contributions made to an IRA or Roth IRA that exceed the annual limit.

Predecessor's Assets

Assets that are included in the estate of a deceased person, which can affect estate tax calculation.

Lifetime Gift Exemption

The total amount an individual can give away during their lifetime without incurring gift tax; it is typically coordinated with estate tax exemptions.

Non-Citizen Spouse Gift Limit

The maximum amount that can be gifted to a non-citizen spouse without incurring gift taxes, currently set at $194,000.

Tax Basis

The original value of an asset for tax purposes, used to determine capital gains or losses upon sale.

Charitable Deduction

A deduction allowed from an estate's total value for charitable contributions made by the deceased, which can help reduce estate tax.

Asset Ownership in Estate Tax Calculation

Includes all property, investments, and interests owned by the decedent at the time of death.

Annuities in Gross Estate

Annuities can be included in the gross estate for tax purposes, affecting overall estate tax liability.