Estate tax

What it means

Estate tax is charged on the estate as a whole, not on what each person receives. The estate files the return and pays before distributing.

There is a federal estate tax, and a small number of states charge one of their own — sometimes at a lower threshold than the federal one.

It is not the same as inheritance tax, which is charged to the person who receives, and not the same as income tax on the estate's earnings.

Why it matters

Most estates owe no estate tax at all. Families frequently expect one and worry about it for months, and the question is usually settled quickly.

Where it does apply, the deadline is short relative to how long estates take to settle, and it is measured from the date of death rather than from when anybody was appointed.

When you are likely to meet it

• When an accountant asks about the size of the estate.
• When a state has its own threshold lower than the federal one.
• When property has to be valued as at the date of death.

How this varies by state

Whether a state charges its own estate tax, and at what threshold, is set by state law. Sahvelo names the rule for the states it has published and does not infer it for the others.

Related terms

• Alternate valuation dateAn election to value an estate six months after death instead of on the day of it.
• AppraisalA professional opinion of what something was worth on a particular date — usually the date of death.
• Date-of-death valueWhat something was worth on the day the person died. It is the number the estate, and often the tax, is measured by.
• Disclaimer of inheritanceFormally refusing an inheritance, so that it passes as though you had died first.
• DomicileThe one state a person legally belongs to, where they intend to remain. It decides where the estate is administered and which state's law governs their personal property.
• EstateEverything the person owned at the moment they died, treated as one thing that has to be settled.
• Fair market valueWhat a willing buyer would pay a willing seller, neither under pressure and both knowing the facts.
• Fiduciary returnThe income tax return an estate or trust files for money it earns after the death.
• Final income tax returnThe last income tax return in the person's own name, covering the part of the year they were alive.
• Gross estateEverything counted before anything is subtracted — which is not the same as what the family ends up with.
• Income in respect of a decedentIncome the person had earned but not received when they died, taxed to whoever receives it.
• Inheritance taxA tax on what a person receives from an estate, charged to the recipient rather than to the estate — and only in a few states.
• Inheritance tax waiverA document from a state tax authority releasing an asset so it can be transferred, used in the few states that charge inheritance tax.
• Irrevocable trustA trust that generally cannot be changed or undone once created. Giving up control is the point of it.
• PortabilityA surviving spouse's right to use whatever federal estate tax exclusion their spouse did not — but only if it is claimed.
• Step-up in basisThe tax rule that resets an inherited asset's value to what it was worth on the date of death.

Official sources

The authority this page describes, at the agency that publishes it. Sahvelo does not restate a rule from a secondary source.

• IRS — estate tax (opens in a new tab)

Sahvelo guidance that uses this

• Taxes after a death