Which of the following best describes the estate tax?

The estate tax is defined as a tax imposed on the transfer of an individual's estate upon their death. This means that when a person passes away, the total value of their estate, which includes assets such as property, investments, and cash, may be subject to taxation before the remaining assets are distributed to beneficiaries or heirs. The tax is based on the fair market value of the estate at the time of death, and it applies regardless of whether the assets are passed on through a will or by intestacy laws.

Understanding the nature of the estate tax is important since it affects how individuals plan their estates and can influence decisions regarding gift giving during their lifetimes as well as overall estate planning strategies. The other options do not accurately reflect the concept of the estate tax: one pertains to lifetime property transfers, another deals with capital gains tax, and the last is related to income generated from renting property.