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 death.
Legal Definition
The applicable credit amount under IRC ยง2010 that offsets the tentative tax on cumulative taxable transfers (gifts during life and estate at death), effectively exempting a specified dollar amount from transfer taxes.
Practical Example
During her lifetime, Nancy gave away $3 million in taxable gifts (above annual exclusions). When she dies, her remaining estate tax exemption is $13.61 million minus $3 million = $10.61 million. Her estate only pays tax on assets exceeding that amount.