What is the difference between an estate tax and an inheritance tax?

An estate tax is paid by the deceased person's estate before assets are distributed; it's based on the total value of everything they owned. The federal government levies an estate tax, and a handful of states do too. An inheritance tax, by contrast, is paid by the person who receives the money, and the rate often depends on your relationship to the deceased, with spouses and children taxed lightly or not at all.

There is no federal inheritance tax. Only a small number of states impose one, and some states have neither. Because the rules vary widely by state, check your state's department of revenue. Try WealthSerene's estate readiness assessment at wealthserene.com/assessments/estate-readiness to see where you stand.