During estate administration, personal representatives carry out the last wishes of a person who has died. They distribute property to beneficiaries or heirs. They also settle their affairs, a process that frequently requires communication with creditors and tax authorities.
There are numerous types of taxes that personal representatives, heirs or beneficiaries may need to consider when planning for the distribution and use of estate resources. The three types of taxes below may require payment during or after estate administration.
1. Income taxes
The person who died may have owed income taxes at the time of their passing. Personal representatives typically file a final income tax return on behalf of the person who died. If they must sell estate resources, then they may also need to file an income tax return on behalf of the estate.
2. Estate taxes
Arizona does not currently collect an estate tax. Still, large estates could be subject to federal estate taxes. As of 2026, any individual estate worth more than $15 million could owe between 18% and 40% of the total estate value in taxes.
3. Capital gains taxes
When people sell real property, business holdings or other investments as part of estate administration, there may be capital gains taxes due. Capital gains taxes based on asset appreciation may be due to both the federal government and the state of Arizona.
Being aware of the tax implications of different estate administration activities can help personal representatives minimize their liability and beneficiaries temper their expectations. Taxes typically require payment before the final distribution of all estate resources. Careful planning and appropriate paperwork during estate administration can limit the losses triggered by taxes.
