Estate Tax

Gift Tax

A federal tax applied when someone transfers money or property to another person without receiving something of equal value in return, above the annual exclusion amount set by the IRS. The annual gift tax exclusion allows individuals to give a certain amount per recipient per year without triggering any tax reporting requirements. Gifts above the annual exclusion count against your lifetime estate and gift tax exemption.

Irrevocable Trust

A trust that generally cannot be changed, modified, or revoked once it has been established, effectively removing the assets from the grantor's ownership and control. Because the assets are no longer considered part of the grantor's estate, irrevocable trusts can provide significant estate tax benefits and asset protection from creditors. They are commonly used in advanced estate planning strategies where tax reduction and wealth preservation are primary goals.

Bypass Trust

A trust commonly used in estate planning for married couples that allows the first spouse to die to pass assets up to the estate tax exemption amount into a trust for the benefit of the surviving spouse, while keeping those assets out of the surviving spouse's taxable estate. Also known as a credit shelter trust or family trust, it effectively doubles the amount of wealth that can pass to heirs free of estate tax. The surviving spouse can typically receive income and principal from the trust during their lifetime.

Marital Deduction

A provision in federal estate and gift tax law that allows an unlimited amount of assets to be transferred between spouses without incurring estate or gift taxes. The marital deduction effectively defers estate taxation until the death of the surviving spouse, at which point the combined estate may be subject to tax. Proper estate planning often combines the marital deduction with trusts like bypass trusts and QTIP trusts to maximize the total amount shielded from estate taxes.