08 Sep How Much Money Can You Inherit Without Paying Taxes?

Worried about how taxes might affect an inheritance?  

This is a very important question if you’re deciding whether or not to accept an inheritance or if you’re trying to make things easier on your heirs. The amount of the inheritance, the relationship between grantor and heir, and the states they live in will determine how much—if any—tax is owed. Here’s what you need to know about how much someone can inherit without paying taxes.

Federal Estate Taxes

If you inherit more than $13.99 million (in 2025) you will have to pay a federal estate tax. The limit for married couples is $27.98 million. However, there are exemptions. When a surviving spouse is the one who inherits, the estate is usually tax-exempt.

When the inheritance is less than the threshold, you do not have to pay federal estate taxes. If you get a message or a call from someone claiming that you owe inheritance taxes, watch out—it’s probably a scam.

State Inheritance Taxes

Arizona does not have an estate tax, but other states do. If any of your heirs live outside of Arizona, they might have to pay additional taxes on their inheritance.

You might also have to pay state inheritance taxes if you live in Arizona, but inherit property from someone in a different state.  

The relationship between grantor and beneficiary can make a difference in some states as well. Close family members usually pay lower rates than more distant heirs, while donations to nonprofit organizations are almost always tax-exempt.

Can a Trust Help You Avoid Estate Taxes?

A revocable living trust will help you avoid probate, but it won’t help you avoid estate taxes. An irrevocable trust, on the other hand, can help you reduce the size of your estate. However, funding an irrevocable trust means giving up control of those assets. Transferring ownership to the trust could have some tax advantages, but it’s not the only option. 

If you need to reduce the size of your estate, you can use other strategies like giving gifts, making charitable donations, or setting up an educational fund. The best thing to do is to seek advice from a legal or financial professional who understands your situation.

Meet with a Trusted Estate Planning Attorney 

At Phelps LaClair, estate planning is all we do. It’s been our specialty for decades, and as a family business, we’re committed to helping other Arizona families plan for the future. If you have questions about reducing the size of your estate, setting up a trust, or avoiding probate, we’re here to help. 

Contact us to schedule a consultation in Scottsdale, Chandler, or one of our other convenient Phoenix area locations.

Photo by Dulcey Lima on Unsplash used with permission under the Creative Commons license for commercial use 8/27/25.