Estate Tax Exemption

Estate tax exemption refers to the amount of money an individual can pass on to their heirs without having to pay federal estate taxes. When a person dies, their total estate value is calculated, and if it exceeds the exemption limit, taxes may apply to the amount over that limit. For example, if the exemption is $12 million and an estate is valued at $15 million, only $3 million would be taxable. This exemption is adjusted periodically and can significantly reduce or eliminate the tax burden on large estates, allowing more wealth to be transferred to beneficiaries.