The estate tax is a U.S. federal tax imposed on the transfer of a person’s assets after death. It applies to the total value of the estate before assets are distributed to heirs.
The purpose of this tax is to tax large accumulations of wealth at the time they are transferred to the next generation.
When a person passes away, their estate is valued. This can include:
After valuation, allowable deductions and exemptions are applied. If the remaining value exceeds the estate tax exemption, the excess may be subject to U.S. federal estate tax. The executor of the estate is responsible for filing the estate tax return and paying any tax due.
Not all estates are subject to estate tax since many fall below the exemption threshold.
The U.S. tax system provides a federal estate tax exemption, which allows estates below a certain value to pass to heirs without incurring estate tax.
This exemption is unified with the lifetime gift tax exemption, meaning that taxable gifts made during life reduce the amount available at death. The exemption amount is set by law and may change annually.
Understanding how much exemption remains available is critical for long-term estate planning, especially for individuals with substantial assets or cross-border holdings.
For Americans living in Israel, estate tax rules remain fully applicable to worldwide assets. While Israel does not impose a federal estate tax, U.S. citizens are still subject to U.S. estate tax rules.
Differences between Israeli and U.S. inheritance and tax laws can create complexity, particularly when estates include Israeli real estate or business interests. Coordinated planning helps prevent unexpected tax exposure and compliance issues.
Philip Stein & Associates assists clients with cross-border estate planning. We help you align U.S. estate tax rules with Israeli considerations. Contact our team to discuss effective strategies today.
Estate tax is calculated by:
The calculation is performed on the estate tax return filed by the executor.
Estate tax exposure may be reduced through lawful planning strategies, such as lifetime gifting, use of trusts, marital deductions, and charitable transfers. The effectiveness of these strategies depends on individual circumstances.
Estate tax is generally due within a specific period after death. It must be paid by the estate, not the heirs. Extensions may be available in certain situations, but, in these cases, interest may apply.