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ESTATE & GIFT TAXES

Estate and gift taxes are important considerations for anyone planning their financial future in Illinois. Understanding these taxes can help you make informed decisions about how to manage your assets, plan your estate, and protect your loved ones from unexpected financial burdens.

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1. Estate Taxes in Illinois

Illinois imposes an estate tax on the transfer of assets from a deceased person's estate to their beneficiaries. The tax is calculated based on the value of the estate and is separate from the federal estate tax.

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​​Exemption Threshold:

  • As of 2024, Illinois has an estate tax exemption threshold of $4 million. This means that if the total value of the estate is below $4 million, it is exempt from Illinois estate taxes.

  • Estates valued over $4 million are subject to Illinois estate tax, with tax rates ranging from 0.8% to 16%, depending on the total value of the estate.

Calculation: The tax is calculated using a graduated rate schedule. Only the portion of the estate that exceeds the $4 million exemption is subject to tax.

Portability: Unlike the federal estate tax, Illinois does not allow portability of the estate tax exemption between spouses. This means that each spouse must use their own $4 million exemption.

Tax Filing Requirements:

  • The estate representative must file an Illinois estate tax return if the estate exceeds the exemption threshold.

  • The return is generally due nine months after the date of death, although a six-month extension is available upon request.

Deductions and Credits:

  • Illinois allows certain deductions and credits that can reduce the taxable value of the estate, including debts, funeral expenses, and charitable contributions.

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2. Gift Taxes in Illinois

 Illinois does not impose a separate gift tax. However, gifts may still be subject to federal gift tax rules.

Federal Gift Tax Rules:

  • The federal gift tax applies to transfers of money or property made during a person's lifetime.

  • For 2024, the federal gift tax annual exclusion is $17,000 per recipient. This means that you can give up to $17,000 to as many people as you like each year without incurring federal gift tax.

  • Gifts exceeding the annual exclusion amount are counted against the lifetime exemption, which is $12.92 million in 2024.

Illinois and Federal Gift Tax Considerations:

  • While Illinois does not have its own gift tax, gifts made within three years of death may be subject to estate tax under the "clawback" provision, which includes certain large gifts back into the taxable estate for Illinois estate tax purposes.

  • It's important to track large gifts and consult with a tax professional to understand how they may affect your overall estate plan.

 

3. Strategies for Minimizing Estate and Gift Taxes

Estate Planning:

  • Establishing trusts can be an effective way to reduce estate taxes. Trusts can help manage the distribution of assets, protect privacy, and minimize tax liabilities.

  • Consider making use of the Illinois estate tax exemption by planning gifts or transfers during your lifetime.

Gifting Strategies:

  • Take full advantage of the federal annual gift tax exclusion by making regular gifts to family members or loved ones.

  • Use lifetime exemption wisely to transfer wealth while minimizing the impact of future estate taxes.

Charitable Giving:

  • Charitable donations can reduce the taxable value of your estate and provide you with the opportunity to support causes you care about.

 

4. Seeking Professional Guidance

Estate and gift taxes in Illinois can be complex, and tax laws are subject to change. It's important to work with an experienced estate planning attorney or tax advisor to ensure your plan is up to date and tailored to your specific needs.

By understanding and planning for estate and gift taxes, you can protect your assets, provide for your loved ones, and leave a lasting legacy.

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