The estate and gift tax now operate under a unified system. A unified estate and gift tax credit or unified credit is a tax credit applied against the federal unified transfer tax. This credit is referred to as the “unified” credit because federal gift and estate taxation are integrated into one unified tax system. The unified estate and gift tax is a tax imposed on property transfer, especially by inheritance, by will, or as a gift. The unified credit is composed of a single unified rate schedule applicable to both gift and estate tax purposes and the tax is imposed on the basis of the cumulative lifetime and death transfers. As of 2013, the unified credit against taxable gifts and estate tax is $5,125,000, adjusted for inflation. In 2016, the unified credit is $5,450,000. When the applicable credit amount is taken in account, however, no tax is incurred until the taxable estate exceeds the unified credit amount. Under the unified transfer tax system, gift taxes are computed as follows: (1) determine the total aggregate gifts for the current year after subtracting available annual exclusions, medical and educational exclusions, and marital and charitable deductions to the extent applicable; (2) determine the total of gifts for all prior years, including pre-1977 gifts; (3) using the unified rate schedule, compute the gift tax on combined amounts of (1) and (2); (4) using the unified rate schedule, compute the gift tax on (2); (5) subtract (4) from (3) to determine the unified transfer tax; and (6) subtract from (5) the applicable unified credit. This applies to everyone and can be strategically used to benefit his or her own estate plan.
 Unified Estate and Gift Tax Credit Law & Legal Definition available at http://definitions.uslegal.com/u/unified-estate-and-gift-tax-credit/.
 Rev. Proc. 2013-15, 2013-5 I.R.B. 444.
 Myron Kove, Amy Morris Hess, George Gleason Bogert & George Taylor Bogert, Bogert’s Trusts and Trustees 271.5 (2013).