Anyone with a very large estate may have to worry about federal estate taxes. Those obligations apply regardless of what state someone lives in at the time of their death. However, only a few states assess state-level estate taxes, and Illinois is one of them.
Those who die in Illinois will have their estate subject to state estate taxes even if their property is worth a fraction of what might trigger federal estate taxes. How much of an estate may be vulnerable to estate taxes at the state level?
Illinois has a lower threshold and lower top tax rate
Estates need to be worth well over $12 million to be subject to federal estate taxes, but they only need to be worth $4 million for Illinois estate taxes to apply. The more the value of the estate exceeds the threshold, the higher the tax rate.
Those that are only slightly over the 4 million dollar threshold may have a tax rate of 0.8%. Those substantially over the threshold may have to pay up to 16% in estate taxes. If the estate is large enough for federal estate taxes to apply, the top rate for those taxes could be as high as 40%.
Proper advance planning is usually the only means of reducing tax obligations during probate. Someone needs to change ownership of certain assets while still alive or arrange for their transfer at the time of their death to keep them from contributing to the full value of their estate.
Addressing the possibility of Illinois and federal estate taxes will benefit those with sizable personal estates and the family members they love.
