What type of tax is levied on the estate of a deceased person before assets are distributed?

The estate tax is a specific tax that is imposed on the total value of a deceased person's assets before they are distributed to heirs or beneficiaries. This tax is assessed based on the estate's net worth, which includes various assets such as property, investments, and cash. The responsibility for paying the estate tax generally falls on the estate itself, rather than the individuals receiving the inheritance.

The key aspect of the estate tax is that it is applied before the assets are passed on to the heirs, making it distinct from other types of taxes. For example, an inheritance tax is levied on the beneficiaries receiving the inheritance, and it can vary by state; it is based on the value of the property received, rather than the overall value of the estate. Income tax pertains to the earnings generated by individuals during their lifetime, and capital gains tax applies to the profit made on the sale of an asset. Therefore, understanding that an estate tax is the designated tax on the value of a deceased person's estate prior to distribution clarifies why this choice is the accurate answer.