Estate tax.
In plain English
Estate tax is a tax the federal government charges on the value of everything a person owned at death (property, investments, cash, life insurance, and more) after subtracting debts. The key point is the exemption: only the value above a set threshold is taxed at all, and that threshold is high enough that the vast majority of estates owe nothing. The estate itself pays the tax before money goes to heirs, not the people inheriting. A surviving spouse can generally inherit any amount with no federal estate tax. A handful of states also charge their own separate estate tax, sometimes with lower thresholds than the federal one.
01Why it matters
Because the exemption is so high, most families will never owe federal estate tax, so for the average person the bigger worry is the smaller state-level thresholds and the paperwork, not a giant federal bill.
02The math, step by step
For deaths in 2026, the federal estate-tax exemption is $15,000,000 per person, a figure the One Big Beautiful Bill Act made permanent starting January 1, 2026 and indexed for inflation from 2027 (source: IRS). So a person who dies in 2026 owning $4 million in assets is well under the exemption: the estate owes zero federal estate tax and the heirs receive the full amount.
03What this is NOT
Estate tax is paid by the estate before money is distributed, based on the total left behind. Inheritance tax is paid by the individual person who receives money, in the few states that have one. They are not the same tax.
04Receipts
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