Estate Tax

The estate tax — sometimes called a "death tax" in public debate — applies to the transfer of wealth at death rather than to income earned during life. Only the portion of an estate exceeding the applicable exemption is subject to the tax; amounts below the exemption pass free of this particular levy. Because exemption levels and rates are set by legislation, they have changed multiple times historically and are subject to future change. Families must work with qualified attorneys and CPAs to understand the current rules rather than relying on figures that may already be outdated.

For wealthy families, the estate tax is often one of the most significant financial events they will ever face, sometimes prompting the creation of the family office infrastructure itself. A three-generation family with operating businesses, real estate, and investment portfolios may find that estate-tax exposure shapes every major structural decision — from how entities are titled to how liquidity is maintained. The reasons families build a family office frequently include coordinating the professionals needed to manage this exposure over time.

The estate tax is conceptually unified with the gift tax and the generation-skipping transfer tax into what practitioners call the "transfer tax system." Understanding how these three taxes interact is essential context for any family office legal structure designed around wealth preservation. The step-up in basis is a related concept that affects the income-tax side of inherited assets.