A: The value of everything you own will need to be totaled up for your estate tax return, which is due nine months after your date of death. Many people are surprised to find out that the death benefits on their life insurance policies will be considered part of their estates by the IRS. Nevertheless, you can leave your entire estate to your beneficiaries without any estate tax if the value of your estate is below the exemption limit ($11.7 million per person as of 2021). Every dollar above the exemption will be taxed at a rate of 40%. One spouse can leave his or her exemption to the other spouse, so a married couple could transfer approximately $23.4 million without estate taxes.
In addition to the federal estate tax, some states impose their own estate or inheritance taxes, which may have different exemption limits. Fourteen states have an estate tax while six have an inheritance tax. Maryland and New Jersey have both.