Tax applied on the transfer of the estate owned by a deceased person is called estate tax. The tax is applicable on any property transferred through the will or according to state tax laws. Other scenarios like transfer through a trust fund or payment of life insurance benefits also get taxed in a similar manner. Estate tax does not apply to the transfer of property within the lifetime of the owner. In that case, a gift tax is applicable. Both estate and gift taxes are part of the Unified Gift and Estate Tax system.
Estate tax applies to all the assets of a deceased person being transferred to someone else. The estate administration does not use the value that was paid initially. Instead, the fair market value of the asset at the time of death is used. The total sum of all the property and assets is known as the gross estate of the deceased person. The state might allow a reduction in value of certain assets before taxation. These assets may include mortgages, debts or charities. Lifetime taxable gifts are added to the net amount to calculate the total tax.
Those against estate tax, question the validity of these taxes, claiming that a deceased person's property has already been taxed during their lifetime. They believe a person's hard earned estate should not be taxed simply because they have passed away. Supporters of the estate tax system claim that these taxes are important to maintain economic equality, while also helping the government in providing services.
If your loved one has recently passed away, you might want to consider discussing the situation with an estate planning attorney. The attorney will oversee the entire process and try to reduce your liability as much as possible.