estate tax

estate tax   n.  A tax imposed on the right to transfer property by inheritance and assessed on the net value of a decedent's estate before distribution to the heirs. Also called death tax.

Estate Tax

A tax levied on an heir's inherited portion of an estate if the value of the estate exceeds an exclusion limit set by law. The estate tax is mostly imposed on assets left to heirs, but it does not apply to the transfer of assets to a surviving spouse. The right of spouses to leave any amount to one another is known as the "unlimited marital deduction".

Investopedia Commentary

When the surviving spouse who inherited an estate dies, the beneficiaries may then owe estate taxes if the estate exceeds the exclusion limit. Because the estate tax can be quite high, careful estate planning is advisable.

In 1997, a change in U.S. laws increased the value of assets that a beneficiary may exclude from federal estate taxes - though many states have their own estate taxes. With this change of laws, small business owners became able to pass on farms and other qualifying businesses to their heirs.

Related Links

Get Ready For The Estate Tax Phase-Out
Getting Started On Your Estate Plan
Skipping-Out on Probate Costs
Three Documents You Shouldn't Do Without

See also: Assets, Beneficiary, Bequest, Escheat, Estate, Estate Planning, Heir, Marital Deduction, Will

estate tax

A tax on the estate of the deceased before any distribution is made to the heirs. A federal unified gift and estate tax provides an exemption before any tax is paid. Although some states also levy an estate tax, it is generally at a much lower rate than the federal tax. Compare inheritance tax. Also called death tax.

Main Entry: estate tax
Function: noun
: an excise in the form of a percentage of the taxable estate that is imposed on a property owner's right to transfer the property to others after his or her death called also succession tax —see also UNIFIED TRANSFER TAX —compare GIFT TAX, INHERITANCE TAX