The amount that can be given each year, per donee, by an individual without gift tax implications. The annual exclusion is $12,000 in 2008 and is indexed for increases in future years.
Applicable exclusion amount
The amount of an estate that is exempt from estate or gift taxes. The amount is $2,000,000 in 2008 and is scheduled to increase to $3,500,000 in 2009.
A transfer of property made under the provisions of a last will and testament.
An estate planning tool (also called a credit shelter trust) that is used to minimize the combined estate taxes of spouses by taking advantage of the unified credit and marital deduction.
A tax deduction available for gifts to qualified charities.
Charitable remainder trust (CRT)
An estate reduction device whereby a donor transfers property to a trust and receives lifetime income from the trust, with the trust property passing to a designated charity at the donor's death.
A change or an addition to an existing will.
A special provision included in some irrevocable trusts that gives limited withdrawal rights to trust beneficiaries. This assures that gifts to the trust are considered gifts of a present interest and, therefore, qualify for the annual gift tax exclusion.
Durable power of attorney
A written document by which a person authorizes another to act on his or her behalf in regard to certain decisions.
The person named in a will to carry out the terms of the will, may be supervised by the probate court.
Federal estate tax
Federal excise tax imposed on the transfer of property at death.
Federal gift tax
A federal tax imposed on the transfer of property during lifetime.
A n excise tax on transfers of property to someone who is at least two generations below the grantor.
Planning technique whereby a husband and wife agree to join in making a gift, effectively doubling the per donee exclusion.
Generally includes all property or property rights an individual owns at the time of his or her death.
State laws that govern the disposition of the estate of an individual who dies without a valid last will and testament.
Dying without a valid last will and testament.
A form of property ownership where two or more individuals own property jointly. It usually includes rights of survivorship, which means the surviving owner or owners succeed to the ownership interest of a deceased co-owner.
Last will and testament
A written declaration by an individual describing how his or her assets are to be distributed at his or her death. A will can also name the executor of the estate as well as guardians for dependents.
Generally, individuals may transfer an unlimited amount of assets to their surviving spouse during their lifetime or at death without gift or estate taxes.
The court-supervised administration of a decedent's estate.
Tenancy by the entirety
Joint property ownership by spouses in which the surviving spouse becomes full owner of the property at the death of his or her spouse.
Tenancy in common
A type of property ownership where two or more individuals own property together (in equal or unequal amounts), normally without rights of survivorship.
A person who executes a will.
A legally created arrangement whereby a Grantor (an individual or individuals) transfers property to be held and managed by another person or entity (Trustee) for the benefit of a third party (Beneficiary). A trust may be revocable or irrevocable and may take effect either during the life (living trust) or upon the death (testamentary trust) of the Grantor.
The unified gift and estate tax credit is the current shelter amount for gifting during ones lifetime and at ones death. When an estate is below the unified gift and estate tax credit limit, there will be no estate tax due at the time of death. Instead, all of those funds pass directly to the specified recipients.
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