An estate tax is a transfer tax levied on property (including cash, real estate and securities) transferred from a deceased person to their heirs.
How Estate Taxes Work:
- Tax obligations arise if the total estate value surpasses exemption thresholds which vary internationally.
- Assets like art collections and private residences receive discounted valuations for tax purposes based on appraisals.
- Complex trust arrangements attempt to exploit exemptions to shield future generations’ inherited wealth.
Example Scenario:
By strategically gifting appreciating stock to family members annually to utilize lifetime gift tax exclusions, the matriarch organized her estate to minimize taxes due upon her eventual passing.
Key Considerations:
Estate taxes aim to curtail accumulation of untaxed inherited wealth but proper planning facilitates otherwise smooth transitions of family assets upon death within legal compliance.