When you sit down to write your will, it’s easy to focus on the “who gets what” part. Deciding on beneficiaries, guardians, and an executor is the personal side of creating a will. You know the people you care most for and you likely have a good idea who would be the right fit for guardians or an executor. But the tax side of this process is just as important. The goal isn’t only to make sure your wishes are honored, but also that your loved ones receive their inheritance in the most efficient way possible. Ignoring tax implications can shrink what your heirs ultimately receive or even create unexpected burdens. What can I do to protect my estate from overburdensome taxes? What kinds of taxes should I be aware of when creating my will? Read on to find the answers to your questions and to learn more about tax considerations when drafting your will.
Understanding the key taxes that come into play
When drafting your will, there are several types of taxes that you should be aware of. Talk with your estate planning attorney or financial advisor about how your will can be drafted to handle potential taxation best.
Federal estate tax
The federal estate tax applies when someone dies and their estate transfers property to others. It’s based on the total value of the estate (everything owned or controlled) minus deductions and exemptions. For 2025, the federal exemption is about $13.99 million per person. This means that estates below that amount usually won’t owe federal estate tax, but may still need to file a return.
Marital deduction
The marital deduction is another key feature. It allows a U.S. citizen spouse to inherit property free of federal estate tax at the first spouse’s death, as long as it’s properly structured. Importantly, the marital deduction is a tax deferral, not a tax elimination. If the plan is not structured carefully, substantial estate tax may be due when the surviving spouse later dies. That often means the tax is deferred until the surviving spouse passes away. How your will directs property, especially between spouses, determines whether those deductions and exemptions work to your advantage.
Charitable donation taxes
Including charitable gifts in your will can be one of the most meaningful ways to leave a legacy. An added benefit is important tax advantages. Under current IRS rules, charitable bequests to qualified 501(c)(3) organizations are generally deductible from the value of your taxable estate, which can help reduce or even eliminate federal estate taxes for some individuals. The federal estate tax exemption is currently high (over $13.99 million per person in 2025), it’s scheduled to increase in 2026 to $15 million. That makes charitable giving an even more strategic estate planning tool for those with sizable estates. Even for smaller estates, designating charitable beneficiaries can reflect your values while ensuring your assets are used in ways that matter to you. It’s essential to work with both your estate planning attorney and tax advisor to structure your gifts properly, whether through a will, trust, or charitable foundation. You need to ensure proper compliance with IRS regulations and maximize potential tax benefits for your estate and heirs.
State estate taxes
Even if your estate doesn’t meet the federal threshold, state-level taxes can still apply. Some states impose estate taxes on the estate itself, while others impose inheritance taxes on the recipient. Thresholds vary widely, and in many states they’re much lower than the federal level. If you own property in multiple states or your beneficiaries live elsewhere, these local tax rules can significantly affect how much passes to your heirs.
Income taxes
Finally, don’t overlook income taxes. Estates and trusts can generate income even after death through rental property, investments, or business interests, and those earnings are taxable. Your will should anticipate how your executor will manage those assets and distributions. For example, under the “stepped-up basis” rule, most inherited property receives a new tax basis equal to its fair market value at death, reducing future capital gains taxes. A thoughtful will can make sure your beneficiaries fully benefit from that rule.
How your will fits with your broader plan
If you’re married, or planning to be, your prenuptial or postnuptial agreement often defines which assets are separate and which are marital. Your will must respect that structure. If your prenup says certain property stays separate, your will shouldn’t try to give it away in a way that conflicts with that agreement. Similarly, if your estate plan includes trusts that take advantage of deductions or exemptions, your will should direct assets into those trusts rather than bypass them. Think of your will as one chapter in a much larger story. It needs to align with your marital agreement, your ownership of assets, and your overall tax strategy. When those pieces work together, you avoid costly confusion and ensure your wishes are carried out exactly as intended.
Key questions to guide your drafting
When you meet with your attorney, make taxes part of the conversation from the start. Here are a few questions you can ask your attorney:
- What is the current and projected value of my estate, and do I risk crossing state or federal thresholds?
- How will my assets be valued for income tax purposes when inherited, and what guidance should I leave for managing or selling them?
- How do the laws in my state, and any state where I own property, affect inheritance or estate taxes?
- Does my will align with my prenuptial or postnuptial agreement so there’s no conflict about ownership or inheritance?
- And finally, does my executor have the authority and support to handle tax obligations correctly, including hiring accountants or legal advisors when needed?
These questions will help make sure you cover important topics when talking to an estate planning attorney about drafting your will. The more proactive you are in raising them, the smoother your estate administration will be.
Smart tax-aware strategies
Even simple tax strategies can make a meaningful difference. A marital deduction plan where each spouse’s will leaves assets in a way that uses both spouses’ estate tax exemptions can defer and reduce taxes over time. A credit-shelter or bypass trust, often created through a will, helps ensure the first spouse’s exemption doesn’t go to waste by holding assets outside the surviving spouse’s taxable estate. If you own a business, investment property, or pass-through entity, your will should also clarify how ownership and income are handled after death since those assets can trigger both estate and income tax issues. Lifetime gifts are another tool. Reducing the size of your taxable estate now can minimize taxes later, and your will can reference how those lifetime transfers fit into your overall plan.
Final thoughts on tax considerations when drafting your will
Writing a will is more than just naming heirs. With a will, you’re creating a roadmap that anticipates the tax and legal landscape your loved ones will face. Even if you’re well below federal estate tax limits, state taxes, business ownership, or changing laws can make a big difference. If you already have or plan to have a prenuptial or postnuptial agreement, or if you own property in more than one state, it’s even more important to draft your will with taxes in mind.
A coordinated plan where your will, marital agreement, trusts, and tax strategy all align helps your heirs receive what you intend without unnecessary costs, confusion, or conflict. When you sit down with your estate-planning attorney, treat your will as more than a document. Treat it as the centerpiece of a thoughtful, tax-smart plan that honors your values and protects your loved ones in every way that matters. And, because estate planning rarely happens in isolation, your will should connect seamlessly with your broader plan, including your trusts, marital agreement, beneficiary designations, and tax strategy. When those pieces align, your legacy becomes stronger and more cost-effective.
Amy is the founding member of Law Offices of Amy Holzman PLLC (LOAH), which was established in 1999. Amy structures estate and gift tax plans for a wide range of clients. She also represents executors, administrators, trustees and beneficiaries in probate, estate and trust administration. She regularly lectures to various groups on an array of estate issues. Amy has decades of experience in this field and started her career at Debevoise & Plimpton in their trusts & estates group.
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