What is estate tax?

Estate tax is a tax on the value of property owned by a person at the time of their death. In the state of Texas, estate tax is imposed by the federal government and is based on the value of the estate. The estate tax rate can range from 18 percent to 40 percent, depending on the total value of the estate. It is important to note that the estate tax is imposed on the estate itself, not on the individual heirs or beneficiaries. Estate tax is separate from inheritance tax, which is a tax on the property or assets that a person has left to their heirs or beneficiaries. In Texas, inheritance tax is not imposed by the state government, but it can be imposed by the federal government if the estate is above a certain value. Estate tax applies when a person dies with assets worth more than a certain amount (the threshold value, or exemption amount). The amount of the tax owed is based on how much the estate is worth in excess of that exemption amount. The exemption amount changes each year. In 2020, the federal exemption amount is $11.58 million. Estate tax is a complex and often confusing topic, so it is important to seek the advice of a lawyer or an accountant before finalizing any estate plans.

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