How Much Can I Leave to My Heirs Tax-Free?

Minimizing taxes is a key component of estate planning and a way to preserve your wealth and maximize what gets passed on to your heirs. While Arizona does not impose a state inheritance or estate tax, federal tax laws may affect how much your heirs ultimately receive. With effective estate planning, you can reduce and potentially eliminate the tax burdens on your estate, leaving more behind for your loved ones.

Does Arizona Have an Inheritance Tax?

There is no inheritance tax in Arizona. It does not matter if your estate is small or worth millions — Arizona will not collect an inheritance tax from your heirs.

Many people confuse inheritance tax with estate tax, but they are different. An inheritance tax is paid by the person who receives the inheritance. Estate tax is paid by the estate before anyone inherits money or property. Arizona does not collect an estate tax from residents, either.

However, other federal taxes could still apply to the assets you leave behind. An estate planning attorney can help you understand how these taxes will work if you plan to leave property or money to beneficiaries in Arizona.

Federal Estate Tax Exemptions

Even though Arizona does not have an inheritance tax, your heirs might still owe federal estate taxes on their inheritances. The federal government collects taxes from large estates, but most are not big enough to trigger the tax penalty. For example, in 2025, heirs only owe federal estate taxes if the estate is worth $13.99 million or more. If you have a large estate, these taxes could lower the amount of money or property that your heirs receive. Tax rates for these large estates range from 18 to 40 percent, so people with large estates often work with estate planning attorneys to reduce how much the government takes.

Estate Planning Tools to Minimize Taxes for Your Heirs

Several tax strategies can help you reduce tax liabilities and maximize what you leave for your heirs. Examples include:

• Lifetime gift exemptions – You can make tax-free gifts (up to a certain amount) to your heirs during your lifetime to reduce the value of your taxable estate.
• Trusts – Certain types of trusts can shield your assets from taxes.
• Charitable giving – Leaving money to causes you care about can also reduce the value of your taxable estate.
• Portability for married couples – Portability lets a surviving spouse inherit any unused portion of the deceased spouse’s estate and gift tax exemption, which can be an effective tax reduction solution.

Talk to an Arizona Estate Planning Attorney

Tax planning is an essential component of any estate plan. While Arizona residents benefit from the lack of state inheritance, estate, and gift taxes, it’s vital to remember how federal tax laws could affect your estate. Pennington Law, PLLC is a top-rated estate planning law firm with decades of experience helping individuals design customized estate plans to safeguard their wealth and leave a lasting legacy for the people they love. Contact us today for a free initial consultation.