The federal estate tax is a tax on your right to transfer property at your death—whether by will or intestate succession (transfer to heirs when a person dies without a will, as provided by state statute). The estate tax consists of an accounting of everything you own or have certain interests in on the date of your death.

The fair market value of these items is used—not necessarily what you paid for them or what their values were when you acquired them. The total of all your assets at death is your "gross estate." The property included in your gross estate may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.

In South Dakota, as in all states, the federal estate tax applies to the transfer of property at death. The tax is based on the fair market value of the decedent's assets at the time of death, rather than their original cost or value when acquired. The gross estate includes a wide range of assets such as cash, securities, real estate, insurance, trusts, annuities, and business interests. As of the knowledge cutoff in 2023, the federal estate tax exemption is significantly high, meaning that only estates exceeding a certain value are subject to the tax. This exemption amount is adjusted periodically for inflation. It's important to note that South Dakota does not impose a state estate or inheritance tax, so residents of SD are only subject to the federal estate tax if their estate exceeds the federal exemption limit. Estate planning with an attorney can help individuals understand how the federal estate tax might affect their estate and explore strategies to minimize potential taxes.