What is the Illinois Estate Tax?

Many Illinois residents are surprised to learn that Illinois has an Estate Tax separate from the more familiar Federal Estate Tax. The Illinois Estate Tax provides for a $4,000,000 exemption from tax per estate. If you have more than $4,000,000 in assets, it is important to speak with an estate planning attorney such as the attorneys at Johnston Tomei Lencyzcki & Goldberg LLC to discuss methods for minimizing the amount of Illinois Estate Taxes paid upon death.

What Assets Count Toward Estate Value?

When determining your total taxable estate for Illinois, you will need to count all of your assets. This includes some assets that you may not normally consider, such as:

• Life Insurance Death Benefits.  The payout amount of the life insurance is considered part of a person’s taxable estate. If you have a $2,000,000 policy, then you are already halfway toward having an estate that is potentially subject to the Illinois Estate Tax.
• Retirement Plans.  You may have substantial savings in retirement accounts such as a 401(k) or IRA. The total value of these plans are included in your taxable estate calculation for Illinois Estate tax purposes.
• Real Estate. Your largest asset may be your home. Your home’s value will be included as part of your taxable estate.
• Inheritance.  You may be a beneficiary of another person’s trust. Under many circumstances your portion of the trust will be included in your taxable estate.
• Tangible Personal Property. Your household goods, collections, automobiles, etc. are part of your estate. If you have an expensive collection of some sort it is important to include in determining the size of your taxable estate.
• Bank Accounts and Investment Accounts.  It goes without saying that your cash in the bank or investments are part of your taxable estate in Illinois.

This is not an exhaustive list. It is important to speak with an estate planning attorney to determine the full extent of your assets that will be subject to the Illinois Estate Tax.

What About Portability?

You may have heard about a concept called “portability” in reference to the Federal Estate Tax.  This permits a surviving spouse’s estate to claim the first deceased spouse’s unused tax exemption amount to be applied to the surviving spouse’s estate. So if Spouse 1 passes away with $9,000,000 in estate value, then another +$2,000,000 can be used in Spouse 2’s exemption when Spouse 2 passes away (assuming 2018 exemption amounts). But this concept only applies to the Federal Estate Tax. It does not apply to Illinois Estate Tax. Therefore, it is important to correctly plan and allocate assets to spouses while both spouses are alive. Meeting with an estate planning attorney can save spouses (and their surviving families) a lot of money on Illinois estate taxes.

What Planning is Available?

You can plan for your Illinois Estate Tax using a number of methods. A commonly used method is to make sure that neither spouse has more than $4,000,000 in their estate. This can be accomplished by creating two trusts, one for each spouse, and then allocating assets between the two trusts. This ensures that the first spouse to die does not die with more than $4,000,000 unless absolutely necessary. Other options also exist but should be discussed with an estate planning attorney such as the attorneys at Johnston Tomei Lencyzcki & Goldberg LLC.

What is the Illinois Estate Tax Amount?

The Illinois Estate Tax has a variable rate, with an effective rate of approximately 28.5% for amounts over the $4,000,000. The Illinois Estate Tax is paid to the Illinois Treasurer upon death, and the Illinois Estate Tax return needs to be prepared. Depending on the size of the estate this can be a sizeable payment or a more modest payment, or no payment at all. It is important to get this right, as the State of Illinois is not shy about seeking unpaid taxes.

Contact the Libertyville Estate Planning Attorneys at Johnston Tomei Lencyzcki & Goldberg LLC Today to Plan for Minimizing Your Illinois Estate Tax

If you believe that your estate will be subject to the Illinois Estate Tax, it is important to speak with an estate planning attorney to make plans to minimize the amount paid to Illinois where possible. The estate planning lawyers at Johnston Tomei Lencyzcki & Goldberg LLC offer a no cost initial consultation to go over your assets and determine whether you need estate tax planning and the best option available to you to accomplish it. Call the Libertyville estate planning law firm of Johnston Tomei Lencyzcki & Goldberg LLC today to minimize your “donations” to the State of Illinois.