How to Calculate Estate Taxes Upon Death in Illinois

How to Calculate Estate Taxes Upon Death in Illinois

By Ann Fischer

Few of us like to think about death let alone paying taxes upon death. However, understanding how your passing will affect your loved ones can help you anticipate the effect of the federal estate tax and plan accordingly.

The Illinois estate tax is a tax on your right to transfer property at your death. The tax takes into account everything you own in your individual name or have certain interests in upon the date of death.

What Assets are Taxable? 

The federal estate tax is calculated on the total fair market value of all your assets on the date of your death, not the sale price or the value when you purchased them. This total is your “gross estate” and is comprised of such items as:

• cash and securities
• real estate
• insurance
• trusts
• annuities
• business interests
• other assets

Certain deductions will help you arrive at your “taxable estate.” These include items such as:

• mortgages
• debts
• estate administration expenses
• property that passes to surviving spouses and qualified charities
• the value of some operating business interests or farms (not applicable for all estates)

With the net amount computed, the value of lifetime taxable gifts (beginning with gifts made in 1977) is added. The tax is computed, then reduced by the available unified credit.

When do I file?

Simple estates which are comprised of cash, publicly traded securities, few easily valued assets, and no special deductions or elections, or jointly held property) do not require the filing of an estate tax return.

However, filing is required for estates with combined gross assets and prior taxable gifts exceeding certain amounts in certain years. The limit was raised significantly in 2018.

2004-05           $1,500,000

2006-08           $2,000,000

2009                $3,500,000

2010-11           $5,000,000+ (special rules for decedents dying in 2010)

2012                $5,120,000

2013                $5,250,000

2014                $5,430,000

2015                $5,450,000

2016-17           $5,490,000

2018                $11,180,000

In 2011, legislation in was passed to allow estates of decedents survived by a spouse to pass any of the decedent’s unused exemption to the surviving spouse. This “portability” election must be made by filing the United States Estate (and Generation-Skipping Transfer) Tax Return.

Form 706 changed to include an elimination of the allowable State Death Tax Credit. For decedents dying after 2005, it is now a deduction.  The dollar amounts and limits in IRS Form 706 are also indexed for inflation. For 2017, the basic exclusion amount for a decedent’s estate is $5,490,000.

Estate taxes should be paid within nine months after the death of the loved one.

What about Illinois Estate Tax?

Estates valued under $4 million do not need to file estate taxes in Illinois. For estates over $4 million, the tax rate is graduated with the upper level ($10.04 million and up) at 16 percent.

To easily calculate your tax, Illinois provides an online estate tax calculator.

It is important to note that the Illinois exemption is not portable between spouses. The exemption is still $4 million, even if both people die.  Therefore, it is essential that your estate planning is prepared properly prior to the death of the first spouse.

Estate planning is an important part of life and one of the best things you can do for your loved ones. To explore your legal options to reduce your heir’s tax burden upon your death, contact the IIllinois Estate Planning Attorneys at Gardi, Haught, Fischer & Bhosale LTD by filling out our free case evaluation form below.