B.16 Gift / income tax strategies Flashcards

The amount an individual can give to any number of people each year without incurring a gift tax or affecting their lifetime gift and estate tax exemption.

The total amount an individual can give away during their lifetime without incurring federal gift or estate taxes.

A strategy allowing married couples to combine their individual gift tax exclusions, effectively doubling the amount they can gift tax-free each year.

A tax credit that offsets gift or estate tax liability, applying to both the lifetime gift tax exemption and the estate tax exemption.

The readjustment of the value of an inherited asset for tax purposes, typically to the fair market value at the time of the original owner’s death, potentially reducing capital gains taxes when the asset is sold.

An estate planning tool where the grantor transfers assets into a trust while retaining the right to receive annuity payments for a set period. Any remaining assets pass to beneficiaries without gift tax.

A trust used to exclude life insurance proceeds from the taxable estate, providing liquidity to pay estate taxes or other expenses.

A trust that allows a homeowner to transfer their residence to beneficiaries at a reduced gift tax value while retaining the right to live in the home for a specified period.

A strategy where income is shifted from a high-tax-bracket individual to a lower-tax-bracket family member, often through gifts or trusts, to reduce overall tax liability.

A tax rule that applies to unearned income (e.g., interest, dividends) of children under a certain age, potentially taxing it at the parent’s marginal tax rate.

A trust that provides income to the grantor or another beneficiary for a period of time, with the remainder going to a designated charity, offering both income and gift tax benefits.

A trust where a charity receives income from the trust for a set period, after which the remaining assets pass to the grantor’s beneficiaries, reducing gift and estate taxes.

A tax on transfers of assets to a “skip person,” typically a grandchild or someone 37.5 years younger, designed to prevent avoidance of estate and gift taxes across generations.

A trust that allows contributions to qualify as a present interest gift, utilizing the annual gift tax exclusion, often used in funding irrevocable life insurance trusts.

A trust that allows a grantor to provide income to a surviving spouse while maintaining control over how the trust’s remaining assets are distributed after the spouse’s death, offering estate and gift tax advantages.