Definition
A federal tax on transferring wealth at death, owed only on the portion of an estate above a very high federal exemption. The vast majority of estates owe nothing. A minority of states levy their own estate or inheritance taxes, often with lower thresholds.
Why it matters
For most households the practical estate issues are wills, beneficiaries, and probate, not this tax. For very large estates it is a planning problem measured in millions, which is why lifetime gifting strategies exist.
Example
A retiree dies with a $2 million estate: a home, retirement accounts, and savings. That sits well below the federal exemption, so no federal estate tax is due, and the executor's work is distribution, not tax. A $30 million estate, by contrast, would owe tax on the amount above the exemption.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.