Estate plans are never static, and recent changes in federal tax laws should prompt a review of your long-term planning. Staying abreast of the shifting rules affects how much you are taxed, whether you gift assets, and your approach to your financial legacy.
Having an experienced estate attorney who can help you determine the best strategy is essential. The ultimate goal remains unchanged: caring for your family.
Planning Opportunities and Risks for Illinois Families
Fewer estates are expected to pay high federal estate taxes as a result of the 2025 One Big Beautiful Bill Act (BBBA). Under this law, the tax exemption limit for generation-skipping transfer tax, gift, and federal estate tax exemption was raised to $15 million per individual ($30 million for married couples). But it could “sunset”—expire—at the end of 2025.
If the BBBA ends, it’s likely the federal exemption limit will revert to about $7 million per person. Combined with the Illinois estate tax exemption limit of $4 million per person, careful planning is needed to coordinate state and federal exemptions, minimizing estate tax exposure.
Ask your estate planning attorney how the following tools may work for your estate, given the window of opportunity:
- Grantor retained annuity trusts (GRAT): A tool that allows the grantor to transfer assets to a trust while retaining the right to annuity payments. Asset growth above the annuity amount passes to heirs in a tax-efficient transfer.
- Family-limited partnerships: This vehicle consolidates combined family assets under centralized management that, over time, are transferred to ownership of younger generations.
- Irrevocable life insurance trusts: An entity that controls a life insurance policy to exclude the death benefit from the taxable estate. This provides liquidity to heirs directly, outside of probate.
Another opportunity to consider is the higher cap on state and local tax deduction (SALT), which was raised to $40,000 and indexed for inflation through 2029. This can be used to free up and redirect cash from tax liabilities to estate planning or liquidity.
Steps to Take Now
- Examine your estate plan. If your net worth is near or above the current federal exemption limit of $15 million, talk to an estate planner about any changes necessary as well as whether your will, trusts, and gifting plans still meet your goals.
- Stress test your plans. How will your current estate planning tools fare under different scenarios, such as a repeal of the $15 million exemption? Your estate planning attorney can model ways that different tools would perform under the most likely future outcomes.
- Reduce exposure. Take advantage of the current high federal exemption to reduce estate tax exposure before the BBBO benefits expire.
- Liquidity planning. Plan for all potential outcomes, such as your family facing high tax bills for real estate they inherit. By thoroughly thinking through the scenarios, such as difficulty selling real estate assets, you may opt to provide a life insurance policy to provide immediate funds.
- Be alert for changes. Tax rules can change with the season, so make your plan flexible enough to adapt to future changes. There are proposals for making permanent individual tax cuts codified by the Tax Cuts and Jobs Act, to reduce to 20% the estate tax rate, or, repeal the estate and GST taxes altogether. If however the individual estate exemption is returned to pre-2017 levels, less than $8 million will be sheltered (for individuals).
When to Act, and When to Hold the Course
It doesn’t make sense for everyone to reconfigure their estate plans to take advantage of temporary tax opportunities. Legacy & Life Law Firm’s knowledgeable estate planning attorneys can evaluate your position and advise on proactive planning. Call for a consultation today.