How to Avoid Illinois Estate Tax 2023 Edition

In Illinois, like the federal government, there is a tax placed on the estates of individuals that must be paid before any money can be dispersed to their heirs. This tax, known as the estate tax, only goes into effect if the estate is worth more than an established amount of money. Estate planning can be a stressful, complex, and time-consuming process, but the Lawyers at Johnston Tomei Lenczycki & Goldberg LLC are here to help you. For example, the Illinois estate tax due on a $4 million estate is $0, but the Illinois estate tax due on a $5 million estate is $285,714. Thus, the “additional” $1 million is taxed at an effective marginal rate of 28.6 percent (that is, $285,714 divided by $1,000,000). Counterintuitively, the marginal Illinois estate tax rate is higher for estates that are only slightly above the $4 million threshold than for larger estates.

Any gift worth more than that given to one person in a year counts against the lifetime gift tax exemption of $12.92 million. Illinois-sourced income also includes capital gains from the sale of an Illinois asset or rental income from Illinois-sitused real estate. While not an exhaustive list, these are often the most common forms of Illinois-sourced income for non-Illinois residents. Applying income tax to individuals is relatively straightforward. Illinois applies income tax to the entire net income of an Illinois resident and also the Illinois-sourced income of a non-resident.

What is Included in An Estate?

If you’re a resident of Illinois and leave behind more than $4 million , your estate might have to pay Illinois estate tax. The Illinois tax is different from the federal estate tax, which is imposed on estates worth more than $12.92 million . So even if your estate isn’t large enough to owe federal estate tax, it might still owe Illinois estate tax. Each year, the Attorney General makes available forms and instructions to calculate and file estate taxes base on the year the individual died.

There are multiple factors used to determine your property tax bill in Illinois, including the assessed value of your home and your local tax rate. Hays Firm, LLC are knowledgeable estate attorneys who have a great deal of experience helping families to protect their assets and ensure that those assets are effectively and efficiently transfer to the next generation. Naturally, Illinois isn’t as kind and no portability provision exists. Therefore, the taxes will start at 4 million and can reach as high as 16% on some large farm estates. With the estate tax starting at a relatively low amount, a farm of 300 acres can be at risk of liquidation to pay the tax.

Office of theIllinois Attorney GeneralKwame Raoul

Dying without a legal spouse can subject all assets to estate tax, but if there is a spouse involved, no estate tax will be imposed. Instead, all assets will fall under the ownership of the surviving widow. Keep in mind that gifts given to spouses must occur at least four years before death. The illinois income tax rate idea of an inheritance tax is a fairly old concept and dates back to the Roman Empire. However, current estate tax policies are mainly derived from feudal arrangements between heirs and sovereignty in the European Middle Ages. Transfers to a spouse are completely exempt from the estate tax.

• Taxes on such assets must be paid before intended beneficiaries can get their inheritance.
• The tax takes property away from families by claiming that some portion of an individual’s wealth should be shared with the public after death.
• The result is that this $1.5 million can be subject to Illinois estate tax while still being exempt from federal estate tax.
• This also applies to non-residents who own physical or real property in Illinois valued over $4 million.
• After a new domicile is established, it is generally recommended you not spend more than six months in any other jurisdiction, although rules may differ by state.