Most people are familiar with the estate tax at that federal level, but did you know Illinois has its own estate tax? Illinois is one of the few states to have this tax, and you should retain Lake County estate planning attorneys to understand the implications of the inheritance tax. In addition, our attorneys at Orlowsky & Wilson Ltd. can also recommend strategies to lower your state inheritance taxes.
The most critical thing to know about the Illinois estate tax is if you have an estate worth less than $4 million, you do not have to pay inheritance taxes. That is a large estate, but it is smaller than the $11 million limit for the federal estate tax. This means that many people in Illinois may need to pay the state tax but not the federal.
However, determining what your Illinois estate tax will be is complex. Its complexity requires the use of algebra; the tax is modeled on the Illinois death tax credit, and that was based on a federal law that is not used today. It is confusing, but the state provides some guidance to calculate your taxes, and your Lake County estate planning attorney also can help.
As with most progressive taxes, including federal income taxes, a different tax rate applies to some parts of the estate value. So, this means there are different tax rates.
You do not have to pay state estate taxes if your estate is worth less than $4 million. But if the estate is worth $5 million, you could pay nearly $300,000 to the state. If the estate is valued at $5 million, there is a tax rate of 29%. This means that people that have an estate just a tad over $4 million might pay less in taxes in dollars. But, they could pay a higher tax rate than a person with a $10 million estate.
Fortunately, there are several ways to lower your tax burden. For instance, the taxes paid are based on the value of your assets when you pass away, not what you bought them for, and not on what their sale price might be tomorrow.
Also, you can use certain deductions to reduce your estate tax burden. Next, you can gift assets to your spouse or put them in a trust. So, they will not be considered part of the estate when taxes are calculated. Another option is to give away property but remember, you have to start early because you may only give $14,000 per person per year. Illinois estate taxes are complex, but your Lake County estate planning attorney can help you prepare for the future and lower your estate tax obligations.
No one wants to pay more inheritance taxes than they need to. Fortunately, there are ways you can pay less in inheritance taxes in Illinois. Talk to our Lake County estate planning lawyers at Orlowsky & Wilson, Ltd. at (847) 325-5559 for more information on this topic.
