When you have worked hard your entire life to garner what you have, it may seem unfair to have your estate taxed so heavily. Fortunately, there are attorneys with experience handling estate taxes in Lombard who could help you lessen the extent of taxes with a trust or other route. Your beneficiaries do not have to receive less simply because you have worked hard; contact an attorney today for more help.
An estate in Lombard is subject to both estate and federal estate taxes, assuming that the estate is large enough. The current exemption for federal estate taxes is approximately $11 million per person. In Illinois, some states have no estate tax, and some states have estate tax exemptions that are tied to the federal limit. In Illinois, the estate tax exemption is $4 million. What this means is that if their estate is more than $4 million, then it could incur some estate taxes. Similarly, if their estate is worth more than $11.4 million or so, then they are subject to federal estate taxes.
Importantly, the submission deadline for estate-related tax documentation is April 15, like everyone else. Extensions for those are common, so a six-month extension to October 15 is possible.
In Illinois, there is a graduated estate tax that eventually caps out at 16%. These percentages would only apply to amounts that are more than $4 million. If their estate was worth $4,000,000,001, then just that $1 would be subject to estate taxes, not the entire amount. In addition, if the estate is large enough to incur federal state taxes, then the tax rate is basically 40% for anything over the exemption amount, and currently, it is $11.4 million.
Some important things to consider regarding estate taxes and other taxes when planning in the estate is to keep in mind that the exemption amount also applies. Gifts are able to reduce the exemption. Lifetime gifts such as the gift tax and the estate tax exemptions are unified. This is because Congress does not want someone to just give away all their property during their life and then avoid the estate taxes when they die.
The unified exemption basically deals with this. For example, the federal estate tax exemption is $11.4 million. It is reduced by gifts that a person gives during their lifetime. The annual exemption for gifts and gift taxes is $15,000 per person, so they may give a person up to $15,000 per year and not have that counted towards their estate tax exemptions. If they give someone $1,015,000 in a calendar year, then their exemption gets reduced by $1 million. When they pass away, their exemption is now $10.4 million instead of $11.4 million.
Similarly, in Illinois, if they are dealing with the $4 million, it is unified with a gift tax exemption. If a person gives a lot of gifts during their life, then it could result in a reduction essentially of that estate tax exemption. Gift taxes and estate taxes go hand in hand, and when they are planning an estate, they definitely need to be cognizant about a client’s gifts that they have given in the past, particularly if those gifts are very large.
There are various estate planning strategies that may be used to mitigate estate taxes in Lombard. With the exemptions so large, it might not apply to many clients, but for the clients that it does is there are certain trust strategies that could be used to help avoid the estate taxes in Lombard. For example, people are able to set up a trust system called an “AB estate plan”, where there is a large estate that is divided up among various trusts. There is also a strategy where the surviving spouse receives an unlimited exemption. They could take advantage of that to try and mitigate the impact of those estate taxes.
When your estate is valued at an above-average amount, you may wish to protect your assets as best you can since you have worked so hard to garner what you have. While this may not be for your interests, and more than likely for beneficiaries of your estate, you could still enlist the help of an attorney who has knowledge of estate taxes in Lombard and how you could mitigate them. Reach out to an attorney today.