unified credit

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Unified Credit

In the United States, a tax credit on estates and large gifts. The unified credit is exceptionally large so that most people will not need to pay federal taxes on their estates and large gifts. For example, the unified credit on an estate is usually around $1 million, meaning that the estate has to be worth more than that in order to be subject to the estate tax.
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unified credit

A credit used against federal taxes due on estates and large gifts. Under current law, the unified credit is sufficient to offset taxes on values of approximately $1 million in estates and large gifts. Thus, the combination of estate value and large gifts must exceed $1 million during a person's lifetime before any taxes must be paid to the federal government.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
It is unclear when, if or how Congress will act with regard to repeal of the estate and GST tax in 2010 and return to earlier tax rates, unified credits, and exemptions in 2011.
While naming a trust as beneficiary provides for efficient use of a couple's unified credits, it generally results in three income tax disadvantages.
The above charts demonstrate that either Jim's 401(k) or Sally's 403(b) must be used to shelter both unified credits. If Jim died first, then the following assets totaling $1,175,000 would be included in his federal gross estate: 1) 401(k) $750,000; 2) stock portfolio $175,000; 3) bank account $100,000 and one-half interest in house $150,000.
The marital and prorated unified credits discussed above may also be used to minimize or eliminate the U.S.
A married couple could each establish GRATs and GRUTs (or split gifts--see Chapter 22) so as to utilize both spouse's unified credits and marginal gift and estate tax brackets.
The above charts demonstrate that either Jim's 401k or Sally's 403b must be used to shelter both unified credits. If Jim died first, then the following assets totaling $1,175,000 would be included in his federal gross estate' 1) 401k $750,000; 2) stock portfolio $175,000; 3) bank account $100,000 and one-half interest in house $150,000.
However, gifts of life insurance or cash to purchase or maintain insurance can pass tax free through the next generation if the donors make the gifts utilizing their unified credits (or make the gifts subject to gift tax if their unified credits have been used up), and allocate some of their generation-skipping exemptions to the gifts.
The taxpayers also tendered as evidence a fax informing their accountant that they had funded SFLP II and requesting advice as to the percentage of partnership interests they should transfer to the children to maximize use of the gift tax annual exclusion and applicable unified credits. The Tax Court said the fax did not show what the partnership ownership interests were immediately before funding or how the stock was allocated among the partners' capital accounts at the time of the funding; thus, they did not clearly establish that the capital accounts were credited before the transfers.
(17) The donees must reflect the deemed gift of the lapsed withdrawal right on a gift tax return, reducing their unified credits. They may also be required to include part of the mast in their estates at death as retained interests under Sec.
Taxpayers often sought to capitalize on their use of unified credits, through varied means.
Today, in assisting these same clients with estate planning, practitioners are confronted with some rather intriguing dilemmas when trying to achieve various tax objectives: [] Fully utilizing unified credits.
The fact that qualified disclaimers are now possible for joint tenancies with right of survivorship and some tenancies by the entirety is good news for clients who may otherwise find themselves taking unused unified credits to their graves.

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