What Does Inheritance Tax Mean?
An inheritance tax is the money a person owes the government when their property or asset is passed on to them after the original owner dies. The amount owed depends on the value of the property or the asset.
Insuranceopedia Explains Inheritance Tax
In the U.S., there is no federal law governing inheritance tax. Therefore, it is mostly a state-based or statutory matter.
The six states that have inheritance tax laws exempt spouses and charitable organizations from paying them. The inheritance tax for children is also very low, while distant relations or unrelated heirs are taxed more heavily.
The value of the inheritance also affects the rate of taxation. In New Jersey, for example, an inheritance worth $25,000 and to $1.1 million will subject the heir to pay 11% of the inheritance value.