Passing assets and property to heirs after a life of hard work is the goal of many Americans. Understanding estate taxes, exemptions, and how they apply to your assets is key to strategic estate planning.
A qualified estate planning attorney can guide you, explaining the tools available and how each interacts with your wishes. Taxes are a primary concern of estate planners, who can suggest ways to minimize exposure, delivering the maximum amount of your estate to your heirs.
Essential Facts About Illinois Estate Tax
Understanding how Illinois estate tax works and how it is applied provides essential knowledge for decision-making when putting together an estate plan.
Illinois is one of 13 states that impose an estate tax on the total value of a person’s assets at death. Each state has a dollar figure threshold for the estate tax as well as acceptable exemptions. Here’s what you need to know about it:
- The Illinois estate tax applies to those whose property and assets are valued at $4 million or more upon death.
- In addition to Illinois’ tax, a federal estate tax may apply to assets of those with estates valued at $15 million (as of 2026) or above.
- Each spouse is given an exemption of $4 million in Illinois. Unlike the federal exemptions, Illinois estate tax exemptions are not portable, so they cannot be combined to reduce the taxable value of a shared estate.
- If one person dies and leaves their estate to their spouse, an Illinois estate worth $3.99 million is exempt from the tax. However, when the surviving spouse dies, they may only exempt $3.99 million of the estate value (federal estate taxes allow the exemptions to be combined).
- If an estate is valued at $1 above the $4 million threshold, the entire estate is subject to tax, not just the amount over $4 million.
- The state requires a special estate tax return to be filed for those with assets valued at or above the state threshold.
- Estate taxes are levied according to the total value of assets. The range is from 0.8 percent to 16 percent. Taxes are graduated, so portions of the assets are taxed at different rates.
- All assets count toward the estate total, including:
- Real estate
- Bank and investment accounts
- Pensions and retirement accounts
- Life insurance accounts (if retained by the grantor)
- Personal property such as vehicles, jewelry, and art
- Digital assets (cryptocurrency, NFTs, etc.)
- Intellectual property that is not held by a business entity
- Deductions can offset the total value of an estate, including:
- Financial gifts to loved ones and charitable organizations, up to $19,000 each, per year (as of 2026), without incurring any gift tax
- Funeral expenses
- Payments for family members’ medical expenses or schooling
- Several types of irrevocable trusts can help minimize tax exposure by removing some of your assets from the taxable total, but keep in mind that Illinois has a Generation Skipping Transfer Tax. Types of irrevocable trusts include:
- Credit shelter trusts, also known as bypass trusts
- Irrevocable life insurance trusts
- Grantor retained annuity trusts
- Spousal Lifetime Access Trusts
- Illinois does not have an inheritance tax. Your heirs do not pay taxes on the assets they receive from your estate.
Putting the Estate Planning Puzzle Together
Understanding how Illinois estate taxes work and who they affect is a good start, but figuring out which of the other estate planning tools work best for your situation is a challenging task. When you confer with an estate planning professional from Legacy & Life Law Firm, you receive solid information and strategic planning tips that only a seasoned professional can provide. Understanding how to structure the components of a comprehensive estate plan so they work together can provide peace of mind that your family will be cared for.