In more detail
An estate tax is charged on the whole estate before it is shared out, and is paid by the estate itself. An inheritance tax, used in many countries, is instead charged to each heir on what they receive, often at rates that depend on how closely related they are. Debts, funeral costs and gifts to a spouse or charity are commonly deducted first, and some systems also count large gifts made during life. Whether and how much is owed depends on the country, region, size of the estate and the heirs. Exemption amounts and rates change often, so check current rules or ask an adviser.
Why it matters
Most estates owe nothing because of the exemption, but those near or above it can lose a large share without planning, and a tax bill can force heirs to sell a house or business quickly to pay it.
Example
In a hypothetical system with a $10,000,000 exemption and a flat 40% rate on the excess, a $15,000,000 taxable estate owes (15,000,000 − 10,000,000) × 40% = $2,000,000, while a $9,000,000 estate owes nothing.