CLE: Planning for and Calculating the Illinois Estate Tax Illinois State Bar Association

All taxes owed by the estate must be paid by the estate within 9 months of the decedent’s death. You should file Form IL-1041-X only after you have filed a processable Illinois Income Tax return. You must file a separate Form IL-1041-X for each tax year you wish to change. Illinois Department of Revenue Income Tax Credits and Expiration sspreadsheet for information about income tax credits. Illinois does not make the estate tax portable for a married couple, even though many other states and the federal government might. Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals.

Estate taxes in Illinois apply to two different scenarios. The first are residents of the state who have an estate valued at more than $4 million. The second are nonresidents who have physical or real property in the state also valued at more than $4 million. Taxes on such assets must be paid before intended beneficiaries can get their inheritance. Few of us like to think about death let alone paying taxes upon death. However, understanding how your passing will affect your loved ones can help you anticipate the effect of the federal estate tax and plan accordingly.

April 26, 2023

If you need assistance planning an estate, call the attorneys at Johnston Tomei Lenczycki & Goldberg LLC in Libertyville. Our estate tax attorneys can help save your heirs money, while also streamlining the estate planning process. At Johnston Tomei Lenczycki & Goldberg LLC, we’ll discuss options to decrease your estate tax burden such as legal trusts and gifts to help establish what the best plan of action is for you and your family.

• Like most taxes that are incremental, such as federal income taxes, a different tax rate applies to certain parts of the overall value of the estate.
• Importantly, changing trust situs should be done formally.
• If you leave behind more than $4 million, your estate might owe Illinois estate tax.
• When using INGs, a good estate planner must be cognizant to “thread the needle” which is Section 677 of the Internal Revenue Code.
• Any assets gifted to a qualified 5013 organization will avoid federal estate taxation.

Illinois, and a handful of other states, impose their own estate tax. Like the federal government, Illinois exempts a portion of a decedent’s estate. However, the Illinois estate tax exemption amount is currently $4 million, which is almost $1.5 million less than that of the federal exemption amount. The result is that this $1.5 million can be subject to Illinois estate tax while still being exempt from federal estate tax. The Illinois estate tax rate is graduated and goes up to 16% on estates worth more than $4 million. Below that amount, an estate will owe less taxes under the 2012 rules than under the 2011 rules.

What is Included in An Estate?

Thus, the estate tax due on a $5 million estate is higher than one might expect. Estates valued under $4 million do not need to file estate taxes in Illinois. For estates over $4 million, the tax rate is graduated with the upper level ($10.04 million and up) at 16 percent.

If you think you need help with estate planning, you may want to consider working with a financial advisor. SmartAsset’s free financial advisor matching tool can help you find advisors in your area. This could lead one to assume that the actual effective Illinois estate tax rate starts at 0.8 percent for smaller estates and increases to a maximum of 16 percent for larger estates. Rather, given the convoluted nature of the Illinois estate tax statute, calculation of the actual amount due requires a complex algebraic calculation. An estate is the estimated net worth of a person, which typically consists of their assets less any liabilities.

Illinois Estate Tax Exemption

For a look at the broader changes to estate planning and a more in depth look at the spousal lifetime access trust, please check our article on Illinois Estate Planning in 2021 and Beyond. Included in an Illinois estate are bank accounts, real estate, life insurance payouts, interests illinois income tax rate in business, and personal property such as cars, jewelry, art, and antiques. With that being said, there are ways to reduce or even eliminate the Illinois estate tax, such as gifting money, life insurance planning, and many other advanced gift and estate planning techniques.

• The purpose of a consultation is to determine whether our firm is a good fit for your legal needs.
• For decedents dying in 2002, pick-up tax is tied to federal state death tax credit.
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• This tax replaces money lost by local governments when their power to impose personal property taxes was taken away.
• While a will discloses instructions, it does not avoid probate.
• A person whose estate is not greater than the established number is exempt from having to pay taxes on his or her estate when he or she dies.