Federal and state estate taxes are best described as

• A. Taxes on the transfer of property from a decedent to his or her beneficiaries
• B. Taxes on income earned by the decedent
• C. Taxes on gifts given during life to others
• D. Taxes on the value of the decedent's personal belongings

Answer: (A)

Estate taxes are taxes on the transfer of property from a deceased person to their beneficiaries. They’re assessed on the value of the decedent’s estate at death and are paid out of the estate before assets are distributed to heirs. This distinguishes them from income taxes, which tax earnings earned during life, and from gift taxes, which tax transfers made during life. The tax isn’t limited to personal belongings alone; it applies to the overall value of the estate (real estate, investments, bank accounts, etc.) after debts and certain deductions, with possible exemptions that can reduce the amount due.