Unified Estate And Gift Tax Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Unified Estate And Gift Tax, written in plain English, along with examples of how it is used.
What is Unified Estate And Gift Tax?
(n) Unified Estate And Gift Tax is the tax levied by federal states on the value of estate or property owned by the entity. While calculating taxable estate, gifts for which no gift tax is paid is also added to arrive at the real worth of the deceased person. The Act is to avoid tax evasion by gifting property
History and Meaning of Unified Estate And Gift Tax
The Unified Estate and Gift Tax refers to the federal tax imposed on the transfer of property by an individual during their lifetime, or at death. It was first enacted in 1924 to address the issue of wealthy individuals avoiding the estate tax by gifting property during their lifetime. Prior to the enactment of the Unified Estate and Gift Tax, there existed separate gift tax and estate tax systems.
Under the current system, both lifetime gifts and post-death transfers are combined and taxed as a unified system, with a single exemption amount that can be utilized during lifetime transfers or at death. The exemption amount is the maximum value that an individual can transfer during their lifetime or at death without incurring any federal gift or estate tax.
Examples of Unified Estate And Gift Tax
David gifted his daughter Sarah a property worth $10,000. As the gift exceeded the annual gift exclusion limit of $15,000, David had to file a gift tax return with the Internal Revenue Service (IRS) and pay gift tax on the $10,000.
Maria passed away, leaving behind a property worth $6 million. The estate will be subject to the Unified Estate and Gift Tax at the time of Maria's death, and her estate will need to file an estate tax return with the IRS.
John and his wife Jane have a combined estate worth $20 million. They can each utilize the current unified gift and estate tax exemption of $11.7 million, effectively shielding their entire estate from federal gift and estate taxes.
Legal Terms Similar to Unified Estate And Gift Tax
- Estate Tax - A tax imposed on the transfer of property at death.
- Gift Tax - A tax imposed on lifetime gifts made by an individual.
- Generation-Skipping Transfer Tax - A tax on transfers made to individuals who are two or more generations below the donor, such as grandchildren or great-grandchildren.