The decisions you make during the estate planning process will have a direct impact on your financial stability later in life and on the inheritance that your loved ones may receive from you. You have to consider many factors including the complicated relationships you have with your beneficiaries and also your personal financial responsibilities when planning your estate.
Whatever you own directly at the time of your death becomes part of your estate, and your estate will either pass to family members in accordance with intestate succession laws or the instructions provided in your estate plan. If you have a large estate that contains real property, businesses or investment funds, your estate could be responsible for paying estate taxes.
When do Illinois estates have to pay estate taxes?
State estate taxes
Illinois is one of the few states in the country that still imposes a state-level estate tax after someone dies. The total value of your estate will determine whether or not it is subject to taxation.
Any estate worth more than $4 million in 2023 could end up responsible for Illinois estate taxes. The tax rate will depend on how much the estate exceeds the exemption threshold. The maximum estate tax rate in Illinois is currently 16%.
Federal estate taxes
If your estate is not subject to Illinois state estate taxes, then you likely will not need to worry about federal estate taxes. In 2023, the federal estate tax threshold is more than three times the threshold for the state of Illinois.
If your estate has a value of more than $12,920,000, then you may have to pay federal estate taxes. Federal estate taxes can consume a significant portion of your estate, with the maximum tax rate going up to 40% in some cases. That might mean that between state and federal estate taxes, more than half of your estate goes to the government instead of your beneficiaries.
People often change how they hold certain property, such as transferring it to a trust. They may also make strategic gifts as a means of diminishing the value of their estates. Discussing your legacy wishes with a lawyer can help you put the proper estate planning documents in place given your intentions and assets.