What is 'Inheritance Tax'?

Inheritance Tax refers specifically to the tax levied on the total value of a deceased person's estate before it is distributed to their heirs. This tax is applicable to the overall assets, including property, money, stocks, and personal belongings left behind after someone's death. It is calculated based on the total value of the estate that exceeds a certain threshold, and the heirs receive their inheritance after this tax is settled.

The other options presented do not fit the definition of Inheritance Tax. A tax on income received by heirs deals with the income generated from the inherited assets rather than the estate's total value at death. A tax on annual earnings pertains to the income earned by living individuals, which is entirely separate from inheritance matters. Lastly, a tax on capital gains involves taxation on the increase in value of an asset from the time it was acquired to when it is sold, not the value of the estate upon death. Each of these taxes operates under different regulations and contexts, distinguishing them from Inheritance Tax.