In the U.S., an estate tax is imposed on the transfer of the taxable estates of all deceased persons, regardless of whether it is transferred via a will or according to intestacy laws.

The estate tax is a part of the U.S. Unified Gift and Estate Tax system. The other part of the system, the gift tax, imposes a tax on transfers of property during a person's life; the gift tax prevents a person from giving away his or her estate just before dying in an effort to avoid inheritance taxation. Many states also impose an estate tax or inheritance tax.

If an asset is left to a spouse or a charitable organization, the estate tax usually does not apply. The estate tax is imposed on other transfers of property made as a result of the death of the owner, such as a transfer of property from an interstate estate or trust, or the payment of some life insurance benefits or financial account sums to his/her beneficiaries.

The Federal estate tax is imposed on the transfer of the taxable estate of every decedent who is citizen or resident of the United States. The starting point in the calculation is the "gross estate." Certain deductions from the "gross estate" amount are allowed in arriving at an amount called the "taxable estate."

According to the United State Internal Revenue Service, the estate tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death. The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. The total of all of these items is your "Gross Estate." The includible property may consist of Cash and Securities, Real Estate, Insurance, Trusts, Annuities, Business interests and other assets.

Once you have accounted for the Gross Estate, certain deductions (and in special circumstances, reductions to value) are allowed in arriving at what is called your "Taxable Estate." These deductions may include Mortgages and other Debts, Estate Administration expenses, property that passes to Surviving Spouses and Qualified Charities. The value of some operating business interests or farms may be reduced for estates that qualify.

After the net amount is computed, the value of lifetime taxable gifts (beginning with gifts made in 1977) is added to this number and the tax is computed. The tax is then reduced by the available unified credit. Presently, the amount of this credit reduces the computed tax so that only total taxable estates and lifetime gifts that exceed $1,000,000 will actually have to pay tax. In its current form, the estate tax only affects the wealthiest 2% of all Americans.

The "gross estate" for Federal estate tax purposes often includes more property than that included in the "probate estate" under the property laws of the state in which the decedent lived at the time of death. The starting point for the calculation of the estate tax is the value of the "gross estate", as modified by certain other statutory provisions.

The gross estate (before the modifications) may be considered to be the value of all the property interests of the decedent at the time of death.

To these interests are added the following property interests generally not owned by the decedent at the time of death:

As noted above, life insurance benefits may be included in the gross estate (even though the proceeds arguably were not "owned" by the decedent and were never received by the decedent). Life insurance proceeds are generally included in the gross estate if the benefits are payable to the estate, or if the decedent was the owner of the life insurance policy or had any "incidents of ownership" over the life insurance policy (such as the power to change the beneficiary designation). Similarly, bank accounts or other financial instruments which are "payable on death" or "transfer on death" are usually included in the taxable estate, even though such assets are not subject to the probate process under state law.

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