Estate and Inheritance Tax

The worth of a person’s possessions at the time of their death is subject to both estate and inheritance taxes. In contrast to inheritance taxes, which are paid by persons who inherit property, estate taxes are paid by the estate itself before assets are dispersed to heirs. Both taxes are frequently combined with a “gift tax” to prevent them from being avoided by selling the asset before death.

Estate and inheritance taxes discourage investment because they are almost solely levied against a nation’s or state’s “capital stock”—the accumulated wealth that makes it richer and more productive as a whole.

Both taxes are complicated, difficult for jurisdictions to manage, and may tempt wealthy people to flee a state or their country altogether or engage in wasteful estate planning.

For these reasons, the majority of American states have abandoned estate and inheritance taxes.

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