Which term refers to the credit for gift and estate taxes due?

• A. Unified Credit
• B. Portable
• C. Taxable Estate
• D. Credit Shelter Trust

Answer: (A)

The important idea here is that there is a single tax credit that offsets both gift tax and estate tax. This is known as the Unified Credit. It works as a dollar-for-dollar reduction of the tax due, up to the amount of the exemption that can be transferred either as lifetime gifts or at death to a beneficiary. Because the same credit covers both kinds of taxes, planners talk about unifying gift and estate taxes.

Portable refers to the ability of a surviving spouse to use any unused portion of the deceased spouse’s Unified Credit, which is a separate concept from the credit itself. The Taxable Estate is simply the value of assets left at death (after deductions) that could be taxed. A Credit Shelter Trust is a planning tool used to preserve exemption amounts for heirs; it’s not the credit itself, though it helps utilize the Unified Credit strategically.