Estate planning is vital to ensure your legacy and anyone with assets should develop a comprehensive estate plan. Carefully working out the details of your estate plan with an attorney can ensure that your family inherits your property and money according to your wishes with the least taxes and other costs. If you need help with your estate plan to reduce taxes, speak to our Lincolnshire estate planning lawyers today.
Not all states have an estate tax, but Illinois is one of them. Therefore, if you live in Illinois and leave behind an estate worth more than $4 million, your estate may be subject to estate tax.
The Illinois state tax is different from federal taxes, which puts an estate tax on estates over $12.92 million for deaths that occurred in 2023. So, even if you have an estate that does not trigger the federal estate tax, you still may have to pay estate taxes in Illinois. Also, if you do not live in Illinois but own property in the state, your estate could owe estate taxes. The estate tax rate is graduated, and the maximum rate is 16%.
The good news is that even if you file an Illinois estate tax return, your estate does not necessarily have to pay the tax. Instead, your estate might take tax deductions that lower the estate’s value. Some of the most popular tax deductions are:
Most people are not enthralled with paying the state and federal governments’ estate taxes. However, there are several ways you can reduce what you owe, and in some cases, avoid paying estate taxes entirely:
You can reduce state and federal estate taxes by giving part of your wealth to family members with gifts. For example, in 2023, you can give one family member $17,000 without triggering taxes. If you give gifts to family every year within the limits, you can substantially reduce the estate taxes owed upon your death.
Another effective way to reduce estate taxes is to give part of your money to a charity with a trust. For example, you can set up a charitable lead trust (CLT) or charitable remainder trust (CRT). If you set up a CLT, some of the assets in the trust are donated to a tax-exempt charity. Donating to charity lowers the estate’s value and gets a tax break. If you set up a CRT, you can move stock or another asset to your irrevocable trust, so, when you die, the investment income is donated to charity.
Understanding state and federal tax laws is difficult when doing estate planning but is made easier with an attorney’s help. Please contact our Lincolnshire estate planning lawyers at Orlowsky & Wilson, Ltd., today at (847) 325-5559 for legal assistance.