What type of tax is levied on a deceased person before assets are distributed to heirs?

The correct answer is estate tax, which is specifically levied on the net value of a deceased person's estate before the distribution of assets to their heirs. Estate taxes are designed to tax the total value of a person's assets, such as properties, bank accounts, and investments, at the time of their death. The tax is assessed based on the value of the estate, which may include all property owned by the deceased less any debts and funeral expenses.

Understanding the nature of estate tax is crucial because it ensures that the government collects revenue from the wealth that is being transferred from one generation to another. This tax is distinct from other types of taxes, such as income tax, which is applied to earnings generated during a person's lifetime, or capital gains tax, which is imposed on the profit from the sale of assets. Property tax, on the other hand, is an ongoing tax based on the ownership of real estate and is not triggered by a person's death.

Thus, the estate tax serves a specific purpose related to the transition of wealth at death, and that is why it is the correct answer in this context.