If you are looking to transfer assets to another person, either overseas or in-country, an attorney could help. Understanding taxes on probate in Lombard is critical to assuring your assets are received in full.
Probate may incur state taxes depending on the value of the estate. Illinois has what is called a decoupled federal estate tax exemption. That means that the exception amounts for state and federal estate taxes are different in Illinois. In Illinois, the exemption is $4 million. When somebody dies and they have a gross estate of over $4 million, they need to file an estate tax return, and they may owe state taxes. The federal exemption is currently $11.4 million, so there is a big difference between the two. Estates with $4 million might implicate estate taxes but not federal taxes.
State tax is due on all estates that have a taxable estate of over $4 million. Even if an individual does not owe federal estate tax because the federal estate tax exemption is so high, a taxable estate between $4 million and $11.4 million will incur state estate taxes.
A probate lawyer with state tax experience could be able to assist in determining whether or not an estate tax return needs to be filed and then actually preparing and filing the return. A gross estate could be reduced by several different things, including expenses and attorney’s fees. Even if there is a gross estate of over $4 million, if there are sufficient deductions, then the actual taxable net estate could go under that amount, and he or she might not owe state estate taxes.
A probate lawyer can help determine that. Generally, estate tax returns are more complicated than individual tax returns. The advice of a probate or tax lawyer is very important.
There are a few ways in which a person can minimize the amount of state taxes that a beneficiary will have to pay after the person dies. The main one is sufficient estate planning. In addition to individual exemptions, there is an unlimited marital exemption: property that passes to a surviving spouse. An estate plan utilizing trusts that are just for the benefit of the spouse and qualify as being a benefit to the spouse is a common way in which people minimize their state estate taxes.
Another way is by gifting. There is a gift tax, which is a yearly gift exemption amount of $15,000 per person per year. For estates that would owe estate taxes, a gifting plan during one’s life can reduce the size of their taxable estate to an amount where they may not owe estate taxes.
Someone who has to pay taxes on a person’s estate should hire a probate lawyer. On an estate large enough that a person has to pay taxes on it, there are likely going to be a whole myriad of issues associated with it. If someone is a beneficiary who is receiving enough property to where estate tax needs to be paid, then there are likely other issues that may be present in the case. A lawyer could help evaluate what types of issues the beneficiary may be facing in the future.
Federal taxes may have to be paid during the probate process. There is a federal tax on estates that have a taxable value of more than $11.4 million. If the decedent did not do any planning, then a lawyer will have to be retained to prepare a federal estate tax return and get estate taxes paid. Before closing an estate, a representative and their attorney have to certify that if any taxes that are due have been paid.
Particularly for very large estates where one needs to file a federal estate tax return, the IRS will accept the return, review it, and then issue what is called a closing letter, which basically says that they have reviewed the return and do not see any issues with it. It is recommended that in estates where a federal estate tax return is filed, that they not be closed until they receive that closing letter from the IRS because then they can go ahead and sign that final report that says all the estate taxes due have been paid.
A federal tax rate of 40% is due when a person dies and has an estate valued at more than $11.4 million.
Someone can minimize the amount of taxes that a beneficiary will have to pay after the person dies through estate planning and gifting. There are various ways that an estate planning or probate lawyer can plan for circumstances where trusts can get the amount of taxable estate underneath that exemption amount, particularly for married couples.
Another way could be through charitable giving. An estate planning attorney can assist in trying to determine, if an individual has charitable goals, how those charitable goals can be accomplished and, at the same time, if they can reduce the size of their taxable estate in order to get under that exemption amount. Generally, gifting plans can be used in order to try and reduce an estate to where it comes under that exemption amount as well.
A person who has to pay federal taxes on someone’s estate would want to hire a probate lawyer to make sure that their interests are being looked after in the probate estate. If you wish to reserve the most of your estate and avoid paying taxes on it, an experienced attorney could help you understand taxes on probate in Lombard.
