Understanding Estate Taxes in Illinois

Planning for federal estate taxes with a large estate can be incredibly challenging. Attorneys spend years learning and mastering the various approaches to helping clients maximize their estates and leveraging tax advantages. This is so that their loved ones can benefit as much as possible. The state of Illinois adds an additional layer to this complexity by imposing a state estate tax beyond the federal estate tax.

Illinois is one of only a few states that requires its’ own estate tax. An Illinois estate tax return (Form 700, Illinois Estate & Generation-Skipping Transfer Tax Return) must be filed for estates with a gross value of at least $4 million. This applies to both residents of Illinois and to non-residents of Illinois who had real or personal property located in the state. The tax return must be filed (along with a copy of the Federal Estate Tax return) within nine months of the descendant’s death.

The Federal and State Exemptions are Different

The Federal and State Estate Taxes are different. The Federal Estate tax exemption changes each year in accordance with inflation. For deaths in 2017, the Federal exemption is $5.49 million. This means that the tax will only be applied to estates larger that $5.49 million. Estate planning experts nationwide make plans around this amount. In contrast, the state of Illinois dictates that the taxable estate begins at a fixed $4 million. This means that if an estate is valued between $4 million and $5.49 million, the estate may be subject to a state estate tax, but not a federal tax.

How is the Taxable Estate Calculated?

The taxable estate may include: cash and bank accounts, real estate, stocks, investments, business interests, personal property, and retirement accounts. For purposes of the Illinois estate tax, the gross value of the estate is taken directly from the estate’s federal tax return. However, there are a few key differences in calculating the Illinois taxable estate, including:

  • There is an Illinois-specific spouse deduction, referred to as a QTIP election, for up to $1.45 million. This defers taxes for up to that amount for the surviving spouse’s benefit.
  • Any real and personal property that is not physically located in Illinois is not within the tax power of the state. Therefore, the taxable estate is adjusted based on the real and personal property physically actually in Illinois.

Estate planning in Illinois requires knowledge and hard work. Call me. Whether you are the executor of an estate, or planning your own estate, I can help you navigate estate taxes on a Federal and State level. I understand the importance of utilizing tax advantages to make sure that your loved ones are taken care of. You can reach The Law Offices of Robert S. Thomas by phone at 847-392-5893 or visit our website to set up a consultation.

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