inheritance tax, assessment made on the portion of an estate received by an individual; it differs from an estate tax, which is a tax levied on an entire estate before it is distributed to individuals. The inheritance tax is usually progressive and is determined by the amount of property received by the beneficiary, as well as by his or her relationship to the deceased. Strictly speaking, it is a tax on the right to receive the property; the estate tax can be characterized as a tax on the right to transmit the property. All states impose either an estate tax or an inheritance tax, some states employing both. A related federal levy is the gift tax, designed to prevent people from avoiding inheritance and estate taxes by giving away property before death.

In the United States, the federal government levied inheritance taxes during the Civil War period and again during the Spanish-American War; since 1916, however, a progressive estate tax has been imposed. The U.S. tax law of 1981 greatly reduced estate and gift taxes by raising exemptions (from $175,000 to $600,000) and lowering rates, and a 2001 law calls phase out the federal estate tax by 2012; estate taxes in 40 states that are based on the federal tax credit for state estate taxes would be phased out in 2006.

inheritance, in biology: see heredity.

inheritance, in law: see heir.

Levy on the property accruing to each beneficiary of the estate of a deceased person. Inheritance tax may be more difficult to administer than estate tax because the value passing to each beneficiary must be fixed, and this often requires complex actuarial calculations. Inheritance taxes date back to the Roman Empire. In the U.S. inheritance taxes have always been collected by the individual states, while the federal government has imposed an estate tax. The first state inheritance tax was imposed by Pennsylvania in 1826.

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Devolution of property on an heir or heirs upon the death of its owner. In civil law jurisdictions it is called succession. The concept depends on a common acceptance of the notion of private ownership of goods and property. Under some systems, land is considered communal property and rights to it are redistributed, rather than bequeathed, on the death of a community member. In many countries, a minimum portion of the decedent's estate must be assigned to the surviving spouse and often to the progeny as well. Intestacy laws, which govern the inheritance of estates whose distribution is not directed by a will, universally view kinship between the decedent and the beneficiary as a primary consideration. Inheritance usually entails payment of an inheritance tax. Seealso inheritance tax; intestate succession; probate.

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