Decoupled: Illinois Estate Tax
February 1, 2009
On January 1, 2009, the applicable exclusion amount for federal estate tax purposes increased to $3,500,000. This substantially increased the amount an individual can pass at death without imposition of federal estate tax. Illinois residents are also subject to an Illinois estate tax. Under present law, the exemption for Illinois estate tax purposes is capped at only $2,000,000. For the first time in recent memory, the federal and Illinois estate tax exemptions are not pegged at the same amount. Consequently, careful planning is required to ensure that state estate tax is not inadvertently imposed upon the death of a spouse.
A well-drafted estate plan for a married couple is often designed to defer the payment of any estate tax, whether federal or state, until the death of the surviving spouse. This is accomplished by maximizing the use of the first spouse's exemption from estate tax and passing any excess assets to the surviving spouse in a manner that qualifies for the estate tax marital deduction. Due to the current difference between the federal and Illinois estate tax exclusions, it is possible under older estate planning documents that some Illinois estate tax may be due upon a spouse's death when it otherwise could be avoided or at least deferred until the surviving spouse's subsequent death.
If you have not updated your estate planning documents since 2005, you should consult with an attorney to ensure that the documents are drafted to avoid any inadvertent imposition of Illinois estate tax. We would be pleased to speak with you and review your documents to see if any changes are necessary. Please feel free to call one of our partners and we can discuss these matters with you.