💰 Tax Planning

Strategies and tools to minimize estate, gift, and inheritance taxes. — 13 terms

• Annual Exclusion

  The amount you can give to any one person each year without having to report it as a taxable gift. For 2024, the annual exclusion is $18,000 per recipient. Married couples can combine their exclusions...

• Crummey Trust

  A type of irrevocable trust that allows gifts to qualify for the annual gift tax exclusion by giving beneficiaries a temporary right to withdraw the gifted amount. Named after the Crummey v. Commissio...

• Estate Tax

  A tax on the total value of a deceased person's assets before they are distributed to heirs. The federal estate tax only applies to estates exceeding $13.61 million (2024). Some states impose their ow...

• Family Limited Partnership

  A partnership created among family members to hold and manage family assets (like real estate or a business). It can reduce estate and gift taxes through valuation discounts and allows older family me...

• GRAT (Grantor Retained Annuity Trust)

  An irrevocable trust where you transfer assets and receive fixed annual payments for a set period. If the assets grow faster than the IRS interest rate, the excess passes to beneficiaries tax-free. It...

• Generation-Skipping Transfer Tax

  A federal tax on transfers of assets to people who are two or more generations younger than the transferor (like grandchildren). It prevents wealthy families from avoiding estate tax by skipping a gen...

• Gift Tax

  A federal tax on transfers of money or property to another person while you are alive, if the gift exceeds the annual exclusion amount ($18,000 per recipient in 2024). The lifetime gift tax exemption ...

• ILIT (Irrevocable Life Insurance Trust)

  An irrevocable trust that owns a life insurance policy. Because the trust (not you) owns the policy, the death benefit is not included in your taxable estate. This can save significant estate taxes fo...

• Inheritance Tax

  A tax paid by the person who receives an inheritance, based on the amount they receive. Unlike estate tax (paid by the estate), inheritance tax is paid by the beneficiary. Only six states impose inher...

• Marital Deduction

  An unlimited tax deduction that allows one spouse to transfer any amount of assets to the other spouse during life or at death without incurring estate or gift tax. Both spouses must be U.S. citizens.

• Portability

  A rule that allows a surviving spouse to use their deceased spouse's unused estate tax exemption in addition to their own. This effectively doubles the amount that can pass tax-free.

• Step-Up in Basis

  When you inherit an asset, its tax basis is 'stepped up' to its fair market value at the date of death. This eliminates capital gains tax on any appreciation that occurred during the deceased person's...

• Unified Credit

  A tax credit that offsets both gift tax and estate tax. It effectively creates a combined lifetime exemption ($13.61 million in 2024) for all taxable gifts made during life and assets transferred at d...