The federal estate tax is a tax on a person's estate following their death. This tax is usually deducted after that person's outstanding debts have been paid.
Death benefits from life insurance are often exempt from the federal estate tax.
The beneficiaries of large estates can lose a substantial amount of it through federal estate taxes. For this reason, many people engage in estate planning to minimize the tax burden when the estate is passed on. Life insurance policies that are exempt from estate taxes are one way to minimize federal estate tax obligations.
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