An specified amount of exemption that can be taken to reduce estate and gift taxes. Estate taxes are due for any amount over the sum of the taxable estate and the taxable gifts during lifetime, less the exemption applicable for the year in which the death occurs. In 2012, this exemption is $5.12 million, with a maximum top rate of 35%. Unless new laws are passed, starting in 2013, this exemptions drops to $1 million, with a maximum top rate of 55%.
A type of insurance in which the insured is guaranteed coverage for life and the premiums are structured in a fixed series of equal payments, with the result being a growth in the cash value of the policy. The cash value is determined through a sinking fund which uses a guaranteed, but conservative rate of return. This is similar to a Whole Life policy. However, with Universal life, if the sinking fund actually earns more on investments than the guaranteed minimum return, the insurer gets the higher return. Upon death, the insured receives both the death benefit and the accumulated cash value.
An act passed in some states of the United States that allows certain assets to be held in the custodians name for the benefit of a minor. Other states have passed the Uniform Transfer to Minors Act (UTMA) in which assets are treated similarly. A UGMA or UTMA account allows the assets to be taxed at the minors income tax bracket.