What Is Estate Tax?
Estate Tax is a succession tax charged on the total value of a deceased person's estate, with thresholds and rates set by national law.
Also known as: Death Tax, Estate Duty.
How Estate Tax works
Estate Tax is triggered by death and is generally computed on the gross value of the deceased person's assets, less permitted debts, deductions and exemptions, with the executor or personal representative paying the liability from the estate before heirs receive their shares. Which assets are reached depends on the connecting factor used by each country: citizenship, domicile or residence of the deceased generally brings worldwide assets into scope, while non-domiciled or non-resident decedents are often taxed only on assets situated in that country, such as local real estate or shares in local companies. In the United States, the IRS describes the estate tax as a tax on the right to transfer property at death, with a filing threshold of 15,000,000 dollars for deaths in 2026, while executors of nonresident non-citizens must file Form 706-NA where United States-situated assets exceed 60,000 dollars. Estate tax treaties, marital deductions, credits for foreign death taxes and lifetime gift rules can change the final liability, and many countries levy no estate tax at all but may instead tax heirs, tax gains realised at death, or apply neither, so cross-border estates often face several overlapping regimes which need coordination.
Estate Tax vs Inheritance Tax
Unlike inheritance tax, which in many systems is assessed on each heir according to the share received and the family relationship, Estate Tax is assessed once on the estate as a whole. Labels vary: the United Kingdom inheritance tax is charged on the estate, so the mechanism matters more than the name.
| Estate Tax | Inheritance Tax | |
|---|---|---|
| Taxable base | Total net value of the deceased person's estate | Value received by each beneficiary, in heir-based systems |
| Who pays | Executor or personal representative, from the estate | Each heir or beneficiary, in heir-based systems |
| Rate drivers | Size of the estate, exemptions and deductions | Share received and relationship to the deceased, depending on country |
Example
Illustrative example: A citizen of Country A who is neither a United States citizen nor a United States resident dies while living in Country B and holds a brokerage account of United States company shares worth more than the 60,000-dollar filing threshold cited by the IRS (illustrative). The executor generally files Form 706-NA with the IRS and checks whether an estate tax treaty between the United States and Country A or Country B reduces the charge. Country B may separately tax the worldwide estate, or tax the heirs, under its own succession rules, so a credit for foreign death taxes may become relevant. Had the same person been a United States citizen, the gross estate would generally have covered worldwide assets, compared against the far higher filing threshold applying to citizens and residents, which illustrates how the connecting factor changes both the base and the threshold.
Common misconception
Myth: Moving to a country without estate tax ends all estate tax exposure on existing investments.
Reality: Estate Tax can still apply to assets situated in a taxing country, such as United States shares or real estate, and some countries continue to tax former residents or domiciliaries for a period.
Frequently asked questions
What is the difference between estate tax and inheritance tax?
Estate Tax is levied once on the deceased person's total estate and paid by the executor, whereas inheritance tax in heir-based systems is levied on each beneficiary's share, often at rates depending on the family relationship.
Do non-US citizens pay US estate tax?
Estate Tax in the United States can apply to nonresident non-citizens on United States-situated assets, and the IRS requires Form 706-NA where such assets exceed 60,000 dollars at death, subject to applicable estate tax treaties.
What is the US estate tax exemption in 2026?
Estate Tax filing in the United States is required for estates above the IRS filing threshold of 15,000,000 dollars for deaths in 2026, according to the IRS, subject to later legislative changes and adjustments for lifetime taxable gifts.
Does the UK have an estate tax?
The United Kingdom levies Inheritance Tax, which GOV.UK describes as a tax on the estate of someone who has died, usually charged at 40 percent above a 325,000-pound threshold, so the mechanism resembles an estate tax.
Related terms
- Inheritance Tax — Heir-based death tax often confused with estate tax
- Gift Tax — Lifetime transfer tax often unified with estate tax
- Tax Residency — Connecting factor determining whether worldwide assets are subject to estate taxation
- Qualified Domestic Trust (QDOT) — US trust preserving marital deduction for non-citizen spouses
Related guides
- Global tax reform and US digital nomads — US tax context for Americans abroad
- Tax treaties and international taxation — Role of treaties in cross-border taxation
Sources
- IRS, Estate tax
- IRS, Some nonresidents with U.S. assets must file estate tax returns
- GOV.UK, Inheritance Tax
Last verified: 2026-10-08. This entry is general information, not tax or legal advice; rules vary by country and change over time.
