How do inheritance taxes differ from estate taxes?

The primary difference between inheritance and estate taxes lies in who is responsible for the tax and how it is calculated.

• Estate tax: This is a levy on the total value of a deceased person's property before it is distributed to heirs. It is imposed on the estate itself, and the tax is calculated based on the gross value of the assets owned or controlled by the decedent at the time of death.12
• Inheritance tax: This is a tax levied on the individual beneficiaries who receive property from an estate. The amount owed is typically determined by the value of the assets received and the beneficiary's relationship to the deceased.3

In the United States, the federal government imposes an estate tax on qualifying estates, while inheritance taxes are controlled by individual states. Because estate taxes are based on the value of the entire estate rather than individual shares, they are generally considered easier to administer than inheritance taxes.32