What are estate taxes?

Estate taxes are defined as taxes imposed on the transfer of a deceased person's property after their death. These taxes are calculated based on the total value of the estate, which includes all assets owned by the deceased at the time of their death, such as real estate, investments, and personal property. The estate tax is part of the broader framework of transfer taxes, which also includes gift taxes, and is designed to tax the transfer of wealth.

In the context of estate planning and administration, understanding estate taxes is crucial for both the estate's executor and the heirs, as they can significantly affect the net value of the estate passed on to beneficiaries. The tax is generally paid out of the estate before any distributions are made to heirs.

The other choices provided do not accurately describe estate taxes. Taxes imposed during a divorce pertain to property division and are unrelated to the tax implications of death. Income generated from an estate relates to income tax, which is distinct from estate tax. Finally, taxes on real estate transactions refer to property transfer taxes, which also do not align with the definition of estate taxes.