Estate taxes can have a profound negative impact on what you can leave behind for the people you love after your death. In Illinois, those with substantial assets are subject to not just federal estate taxes but also Illinois state estate taxes.
In fact, more people will wind up paying taxes to the state of Illinois than to the federal government because the state threshold for taxation is lower. Both of these taxes are progressive, which makes bigger estates more vulnerable. The more your estate’s value exceeds the maximum set by the state or the federal government, the higher the tax rate that you might have to pay.
What are the rules on estate taxes in Illinois?
Generally speaking, the first four million dollars in value in an Illinois estate is considered “exempt” from taxation. Estates with $40,000 or less of taxable value (those worth $4,040,000 or less) won’t actually pay any taxes, but a dollar more than that could mean a hefty tax bill for your heirs.
The tax rate increases based on how much the total value of the estate exceeds that $4 million maximum. Those with estates worth $14.04 million or more, for example, will pay anywhere between 0.8% in taxes (at the lowest level) to 16% in taxes (at the highest level).
The federal estate tax is also noteworthy because it also has a progressive rate increase the more someone’s estate exceeds the maximum. You might end up paying nearly four times as much in taxes to the federal government, which has a 40% maximum estate tax rate.
What can you do to minimize your estate taxes?
Careful planning when you structure your estate, including the integration of certain tax strategies, can help you keep your tax obligations low so that your family members inherit as much as possible.