Estate Tax
A tax on the total value of a deceased person's assets before they are distributed to heirs. The federal estate tax only applies to estates exceeding $13.61 million (2024). Some states impose their own estate taxes with lower thresholds.
Legal Definition
A tax imposed on the transfer of the taxable estate of a decedent, calculated on the fair market value of the estate's assets at the date of death (or alternate valuation date), less allowable deductions and credits.
Practical Example
Margaret dies with an estate worth $15 million. After applying the federal exemption of $13.61 million, the estate tax applies to $1.39 million. The estate must file a federal estate tax return and pay the tax before distributing assets to heirs.