What is an inheritance tax?

An inheritance tax is specifically a tax imposed on an individual who receives property or assets from someone who has passed away. This tax is calculated based on the value of the inheritance received by the beneficiary. The rate may vary depending on the relationship between the deceased and the heir, where closer relatives might pay a lower tax rate compared to distant relatives or non-relatives.

This definition aligns closely with the context of inheritance, where the recipient is directly taxed for what they gain from the estate. Understanding this tax is crucial for financial planning and estate management, especially for individuals who might be beneficiaries of a sizable estate. It highlights the obligations that heirs have when they receive inherited property, which can influence their overall financial strategy.