When starting your estate plan, you’ll most likely think about who gets what after you die. While that’s a good starting point, there is much more to consider. When you talk with an estate planning attorney, they will help you understand the difference between an Illinois estate tax and inheritance tax. And how to set up your estate plan to minimize both.
When writing your will, you think of everything you own and who would appreciate having it after you pass away. You should also consider how the taxes will affect your heirs. When you leave your 1967 Shelby Mustang to your nephew, you want him to enjoy it – not be so burdened with taxes that he has to sell it.
Let’s discuss the specifics of an Illinois estate tax and inheritance tax.
The difference is when the tax is taken and who pays it.
An estate tax is levied on the estate after you die. Your estate amount is the total worth of all money and assets. This includes property, automobiles, bank accounts, investments and all other assets. The taxes must be paid before the funds can be distributed to your heirs.
In Illinois, the state estate tax threshold is $4 million. This means if your estate is worth less than $4 million, your estate will not owe any money in taxes to the state. But there is a federal estate tax.
An inheritance tax is levied on the heirs once they receive the assets you left them. Thankfully, there is no inheritance tax in Illinois. But the inheritance tax in other states could apply to you if you own property or have assets outside of Illinois.
The laws about married couples and estate taxes are a bit different. When one spouse dies, all assets transfer to the surviving spouse without any estate tax. But when the other spouse dies, the taxes are applicable.
Your estate planning attorney can talk to you about the various ways to build your plans to minimize taxes. Some options that you may discuss are:
Call us for more information on setting up an estate plan specifically designed for you. We will help you understand inheritance and estate taxes, how they work together, and how to minimize taxes. Contact one of our lawyers today and schedule an appointment at 630-864-5835.
AREAS WE SERVE: DuPage, Kane, Lake and Will counties.