Define: Estate Taxes

Estate taxes, also known as inheritance taxes or death duties, are taxes imposed on the transfer of a deceased person’s estate to their heirs or beneficiaries. These taxes are typically levied on the total value of the estate and may apply to assets such as real estate, investments, cash, and personal property. The purpose of estate taxes is to generate revenue for the government and to help redistribute wealth within society. The tax rates and exemptions for estate taxes vary by jurisdiction and can change over time based on legislative decisions. Estate planning strategies, such as trusts, gifts, and tax deductions, may be utilised to minimise estate tax liability and maximize the inheritance received by heirs or beneficiaries.

Taxes imposed by the state or federal government on property as it passes from the dead to the living. All property you own, whatever the form of ownership, and whether or not it goes through probate after your death, is subject to federal estate tax. Currently, however, federal estate tax is due only if your property is worth at least $2 million when you die. The estate tax is scheduled to be repealed for one year, in 2010, but Congress will probably make the repeal (or a very high exempt amount) permanent. Any property left to a surviving spouse (if he or she is a U.S. citizen) or a tax-exempt charity is exempt from federal estate taxes. Many states now also impose their own estate taxes or inheritance taxes.

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This glossary post was last updated: 29th March 2024.