What Is an Estate Tax?

The estate tax is something that you might have to deal with when passing on your estate to a beneficiary. Here are the basics of the estate tax.

When It Applies

The estate tax is a type of tax that is levied whenever an individual passes away and conveys her assets to a beneficiary. The estate tax does not apply to everyone in the country. In fact, only a very small percentage of wealthy Americans have to worry about the estate tax.

Estate Tax Exemption

The estate tax exemption is continuously being altered by the government. In order to determine if you will be affected by estate taxes, you will need to determine what the estate tax exemption is. For example, the estate tax exemption used to be $3.5 million. If this was the estate tax exemption when one of your loved ones died, the first $3.5 million of her estate was able to be passed on without any taxes. If she had an estate worth more than that amount, the IRS charged a certain percentage of taxes on the overage. With a married couple, each spouse receives his or her own exemption.