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ESTATE AND GIFT TAX CONSIDERATIONSexcise tax on the transfer of property of individuals, either during their lives orupon their deaths.The federal estate and gift tax is a unified transfer tax system comprisingtwo elements: the first element is the gift tax; the second element is the estate tax.The tax is unified in that both gift and estate transfers are taxed as an integratedwhole. They constitute a unified transfer tax system.The federal estate tax is a tax on the value of estate property of an individualpassing to others on his or her death. This is not the same as state law inheritancetaxes, which tax the beneficiary or recipient of property from a decedent.Thus, the estate tax is a tax on the transmission of wealth at death; it is a tax onthe right to dispose of property. The federal gift tax is a tax on the value of propertythat a living individual passes, to one or more other persons, during his orher life when property of lesser value (if any) is received in return—that is, atransfer of property for less than adequate consideration.Another transfer tax is the tax on generation-skipping transfers. The generationskippingtransfer tax is not integrated with the gift and estate transfer tax system,but is a separate tax on transfers. This tax, however, is complementary to,and works in conjunction with, the unified gift and estate tax system. It reachestransfers of wealth that are otherwise missed by the unified transfer tax. As itsname implies, it endeavors to tax transferred wealth that skips a generation.Separate and apart from its function as a revenue device, the federal transfertaxes serve an important social function. These taxes tend to lessen the concentrationof wealth, particularly family wealth, in society. Nevertheless, because ofthe increasing complexity of the estate and gift tax regime, its growing applicabilityto greater numbers of individuals, and the relatively small amount of taxrevenue generated by these taxes, serious consideration is being given to permanentrepeal of this component of federal taxation. 1Although the federal estate and gift tax applies to any transfer, the traditionalfocus of concern has been on transfers within the family context. Moreprecisely, the focus is upon generational transfers of family wealth to successivegenerations.The income tax, as a progressive tax, sets rates that increase as income levelsrise. 2 As a tax on income, however, it has little effect on previously accumulatedwealth. It may lessen individuals’ ability to accumulate wealth, but it has no effecton previously accumulated wealth—typically family wealth—that is passed fromgeneration to generation.Unlike the federal income tax, the federal estate tax is, fundamentally, a taxon wealth. It is a tax on personal wealth, and generally arises whenever thatwealth is transferred gratuitously during an individual’s life or upon transfer atthat individual’s death.The estate tax is designed to lessen concentrations of wealth in familiesthrough a progressive tax rate structure. The estate and gift tax rates begin at18 percent on the first $10,000 of taxable transfers and reach 49 percent on taxabletransfers up to $2.5 million. For taxable transfers in excess of $2.5 million1 Detractors of this tax prefer to characterize it as a death tax.2 See § 2.15. 224