Estate Tax

Definition - What does Estate Tax mean?

Estate tax is a one-time tax that is paid by the heir of an estate to the government on the non-exempt portion of the estate. The transfer of assets to a surviving spouse does not usually come under the purview of estate tax. In the United States, some states have enacted their own inheritance tax apart from the federal estate tax.

Justipedia explains Estate Tax

Some amount is exempted under the law; an heir is required to pay estate tax only on the amount exceeding that. The U.S. congress passed the American Taxpayer Relief Act of 2012 on January 1, 2013. This act permanently established $5 million (2011 basis with inflation adjustments) as the exclusion limit for estate tax. It also set the maximum tax rate for estate tax at 40% from 2013 onwards.

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