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Categories: General Tax Terms

Estate Tax refers to a tax imposed on the total value of a deceased person’s estate before the assets are distributed to the heirs. This tax is calculated based on the fair market value of the estate’s assets, including real estate, stocks, and personal property, at the time of the individual’s death.

The estate tax is typically applicable only to estates exceeding a certain threshold, which can vary by jurisdiction. For example, in the United States, the federal estate tax applies to estates valued over $12.06 million (as of 2022), with rates generally ranging from 18% to 40%.

An example of estate tax calculation would be as follows: If an individual passes away and their estate is valued at $15 million, the estate may be subject to federal estate tax on the $2.94 million exceeding the exemption limit. The executor of the estate is responsible for filing the estate tax return and ensuring payment of any taxes owed before distributing assets to beneficiaries.

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