Taxes imposed by the state or federal government when it is passed from the deceased to living heirs. All property is subject to the federal estate tax, however the first $1 million of property is exempt, and this limit will gradually rise to $3.5 million in 2009, before the estate tax is repealed completely in 2010. However, unless Congress extends the repeal, the estate tax will return the following year. So plan to die in 2010.