Estate Tax
Definition
A federal tax on the transfer of a deceased person's assets to their heirs. The estate tax applies only to estates exceeding the exemption threshold, which is $13.99 million per individual in 2025 (effectively $27.98 million for married couples). Estates above the threshold are taxed at rates up to 40%. The exemption is scheduled to be roughly halved after 2025 when current provisions sunset. Some states impose their own estate taxes with lower thresholds.
Example
A person dies with a $16 million estate. After the $13.99 million federal exemption, approximately $2.01 million is subject to estate tax at rates up to 40%, potentially resulting in roughly $800,000 in tax.