One of the most common reasons for creating an estate plan is the desire to leave a legacy that protects the people we love. Some of the most critical parts of an estate plan include naming a guardian for your minor children and creating legal guides that can help your family make decisions about your medical care and other issues in the future.
Unfortunately, the more successful you have been in life, the more likely it is that the estate you leave to your family could create some stress and hardship. In some cases, your family could have to pay substantial estate taxes to the state of Illinois, as well as the federal government.
The good news is that with careful planning before you die, you can drastically reduce or even eliminate the liability for estate taxes faced by your heirs and family members.
Illinois has a high minimum for estate tax
Many states do not charge an estate tax, but Illinois does assess this tax. Those who die in Illinois with an estate worth four million dollars or more may have to worry about paying state estate taxes. Those with an estate of over 11 million dollars may have federal estate taxes, too. The amount of taxes increases with the value of the estate, but these percentages and exempt amounts change frequently.
However, placing those assets in a trust is one way to avoid paying state and federal estate taxes. You may also consider giving assets to your family members as gifts while you’re still alive. That way, you get to enjoy your family members using what would otherwise have just been part of an inheritance.
Trusts are a great option for families with sizable estates
Creating one or more trusts is an easy way to control your assets without incurring tax liability. Trusts give you a lot of control over your assets, and you can either fund them when you die or while you are still alive. You can dictate how much people can use in a specific time or what the assets can get used to pay for.
You can help protect your wishes by naming people you implicitly have faith in as trustee(s). A trust helps you have the security of knowing that your family has protection after you die. Trusts can also help you provide for yourself as you get older. In fact, older adults with moderate assets that don’t meet the threshold for estate taxes may also be interested in creating trusts so that they can ensure they have something to leave behind even if they need Medicaid coverage later in life.
Whether you want a trust in your estate plan to avoid taxes or to help connect with long-term care benefits, advance planning is in your best interests.