Overview

If the only certain things in life are death and taxes, death taxes must be the most certain of all. There are two kinds of death taxes. The first and most common kind of death tax is called the "estate tax". The second type of death tax is called the "inheritance tax." An estate tax taxes the value of the assets in your estate at the time of death and the more assets you have, the greater the tax. An inheritance tax determines the rate of tax by the degree of kinship of the person receiving the assets at the time of the death of the asset holder.

The federal government has an estate tax that applies to all estates over an exempt amount. Most of the states have what is often called a "sponge tax". This means that the individual state having a sponge tax, instead of having its own complicated estate tax system, merely takes as its estate tax a portion of the federal estate tax which if not taken by the state would go the federal government. Because it represents a portion of tax money that if not claimed by the state would revert to the federal government, the result is there is no additional state estate tax burden.

Although most states utilize the sponge tax as a death tax, fourteen states have their own estate or inheritance tax.