What is the meaning of Estate tax?

Your estate owes federal' Estate tax' on the value of your taxable estate (your gross estate minus your liabilities and the cost of settling the estate) if the estate is larger than the amount you are permitted to leave to your heirs tax free. That amount, which is set by Congress, is $1 million for 2002 and 2003. The tax-exempt amount is scheduled to increase periodically between 2004 and 2009, and the estate tax will be eliminated in 2010. However, without further Congressional action, the tax will be reinstated in 2011at 2002 levels, If your estate may be vulnerable to these taxes, which are figured at a higher rate than income taxes, you may want to reduce its value by using a number of tax planning strategies, including making nontaxable gifts and creating irrevocable trusts. Further, if you're married to a US citizen and leave your entire estate to your spouse, there are no estate taxes, no matter how much the estate is worth. However, estate taxes may be due when your surviving spouse dies.