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Explain Inheritance Tax

Inheritance Tax

Some U.S. states, as well as the United Kingdom, impose inheritance tax on the heirs and beneficiaries of a deceased person's estate. The amount an heir pays depends on how much property and assets they receive, as well as their relationship to the deceased person. It is sometimes called the "death tax" by critics.

Beneficiaries and Heirs

In earlier times, an heir was the oldest male child in a family, but today the term covers anyone who inherits all or part of a deceased person's estate. Children and surviving spouses are often heirs. A beneficiary is someone directly named in the will of the deceased person. Charities can also be named as beneficiaries.

Estate Tax

The terms inheritance and estate tax are often used interchangeably, but in fact they are different. Estate tax is imposed on the total worth of deceased's entire estate. By contrast, inheritance tax is levied on the beneficiaries and only taxes the worth of the property they receive: if a son and a daughter each receive half of their father's estate, each will pay inheritance tax on the 50 percent they receive.

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