Estate Tax Glossary
Key terms and definitions related to estate tax, inheritance tax, and estate planning.
- Decedent
- The person who has died. Estate tax is calculated based on the decedent's assets at the time of death.
- Estate Tax
- A tax imposed on the total value of a deceased person's estate before assets are distributed to beneficiaries. Paid by the estate itself.
- Estate Tax Exemption
- The threshold amount below which no estate tax is owed. Also called the exclusion amount or unified credit equivalent.
- Estate Tax Return
- The tax form filed to report the value of a deceased person's estate and calculate any tax owed. The federal form is IRS Form 706.
- Executor
- The person or institution appointed in a will to administer the estate, including filing tax returns and distributing assets.
- Gross Estate
- The total fair market value of all assets owned by the decedent at the time of death, before deductions.
- Inheritance Tax
- A tax paid by beneficiaries on assets they receive from a deceased person's estate. Rates usually depend on the beneficiary's relationship to the decedent.
- IRS Form 706
- United States Estate (and Generation-Skipping Transfer) Tax Return. Filed to report the value of a decedent's estate and calculate federal estate tax.
- Irrevocable Trust
- A trust that cannot be modified or terminated by the grantor after creation. Assets in an irrevocable trust are generally excluded from the taxable estate.
- Marital Deduction
- An unlimited deduction that allows a surviving spouse to receive any amount of assets from a deceased spouse's estate without estate tax.
- Personal Representative
- The person appointed by the court to administer an estate when there is no will, or when the named executor cannot serve.
- Portability
- A federal provision allowing a surviving spouse to use the deceased spouse's unused estate tax exemption amount (DSUE). Requires filing Form 706.
- Probate
- The legal process of validating a will and administering the estate of a deceased person, including paying debts and distributing assets.
- Revocable Living Trust
- A trust created during the grantor's lifetime that can be modified or revoked. Assets in a revocable trust are included in the taxable estate.
- Step-Up in Basis
- When inherited assets receive a new cost basis equal to their fair market value at the date of death, which can reduce capital gains tax for beneficiaries.
- Taxable Estate
- The gross estate minus allowable deductions (debts, expenses, charitable bequests, marital deduction). Estate tax is calculated on this amount.
- Unified Credit
- A tax credit that effectively exempts a certain amount of an estate from federal estate tax. The credit amount corresponds to the exemption amount.