People tend to use the terms “death tax”, “estate tax” and “inheritance tax” like they’re all exactly the same thing. While estate tax and inheritance tax both fall under the umbrella of “death tax”, they’re actually completely different.
An estate tax is assessed on the value of a person’s estate, as a whole, when they pass away. There’s the federal estate tax – which is scheduled to make a return, in some form, at the beginning of 2011 – and then there are state estate taxes. Only a limited number of states assess an estate tax, and Florida is not one of them.
So, if your estate is large enough to qualify for estate taxation, the exact amount of the tax bill is determined based on the value of the estate, without regard to who inherits what. The estate tax is generally paid out of the assets of the estate.
Instead of looking at the whole estate, an inheritance tax focuses on what each individual inheritor of an estate receives. So, if the inheritor is not exempt from this tax, and the transfer qualifies for taxation, then an inheritance tax is assessed, and the person inheriting is responsible for the bill.
This only applies in certain states, though. There’s no federal inheritance tax, and currently only seven states have an inheritance tax – Florida is not one of them.
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