Estate and Gift Taxes (Transfer Taxes)
One of the most hotly contested issues in political circles is the gift and estate taxes, sometimes called transfer taxes, inheritance taxes, or the death tax. These taxes are not actually taxes paid on amounts earned, but on amounts transferred to someone else. Under the current system, if you give away too much money to other individuals (in life or at death), the government takes another bite out of it. The amounts due for these taxes are ultimately the responsibility of the giver of the gifted or inherited amounts, though most giftors make arrangements to pay the taxes using various estate planning techniques.
Each person is given a maximum lifetime credit (called the unified credit because the federal gift tax and estate tax are integrated into one unified tax system), or amount of total net worth they can transfer without having to pay these transfer taxes. If they give away too much money during life, they use up the credit while they’re still alive. If they wait to give away the bulk of their money until they die, the full amount of the credit can be used then. If they give away more money than the credit covers, any amounts above that are taxed at a set of progressive tax rates.
Taxpayers can make a number of types of transfers without using up any of their unified credit. First, taxpayers are always per