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How does estate tax work in Illinois?

| Nov 2, 2020 | Estate Planning

When planning your estate, you should consider the tax implications for you and your beneficiaries. While Illinois does not have an inheritance tax, your estate may be subject to federal and state estate taxes.

Review the factors that affect estate taxes in Illinois as you consider your end-of-life wishes to provide for your family.

Federal and state tax threshold

Your heirs will not owe federal tax on your estate unless its assets exceed the maximum taxable value, currently $11.58 million. If the value of your estate exceeds $4 million, Illinois estate tax takes effect. The state charges a gradually increasing tax rate of up to 16% depending on the size of your taxable estate.

Inclusions and deductions

If you expect to have an estate worth millions, estate planning strategies can reduce the tax burden. For example, you do not have to pay estate tax on property left to a surviving spouse or domestic partner. However, all other assets count toward your taxable estate, even bank accounts and property that do not require probate in Illinois.

Because Illinois does not charge a gift tax, you may consider passing along some assets to children and grandchildren during your lifetime. Doing so can reduce the size of your taxable estate. However, check the size of your gift to make sure it does not require federal gift tax.

When your estate owes federal or state tax, the executor must file a tax return within nine months of your death. Choosing a trustworthy executor can help streamline the process of managing your estate for your loved ones.